Photographer: Chris McGrath/Getty Images

Inflows, Inflation and IMF: Egypt’s Economic Overhaul in Charts

  • Government began overhauling ailing economy in November
  • Foreigners have bought debt, equities since pound was floated

Egypt is overhauling an economy that was starved of investment and hard currency during years of upheaval following the Arab Spring. It has floated the pound, raised interest rates and cut subsidies, securing a $12 billion International Monetary Fund loan in November.

In some areas, the impact has been almost immediate. The government tapped international bond markets for the first time since 2015 and local financial markets have attracted investments. On the flip side, soaring inflation is depressing consumer demand among hard-pressed Egyptians.

These charts illustrate key financial and economic changes over three eventful months.


Central bank data shows overseas investors, who abandoned Egyptian assets following the 2011 uprising against President Hosni Mubarak, returning to the country’s debt markets. Foreign holdings of Egyptian Treasury bills rose by 11.5 billion pounds (about $630 million) in January to $1.15 billion -- though that’s still far below the almost $10 billion held in 2010. The bank said foreigners bought about $250 million of mainly T-bills in a single day this month.


Foreign inflows to Egypt’s stock market have reached the most since the 2011 uprising, with investors betting on an earnings recovery and taking advantage of lower dollar-based valuations. The benchmark EGX 30 Index has surged 55 percent since the currency float in local currency terms.


Egypt’s decision to float the pound had an immediate impact, diminishing the significance of a black market that had been fueled by expectations for the currency to weaken. Fitch Group’s BMI Research said it expects the pound to “bottom out” at current levels, and may rally by as much as 7 percent over the next few months. The IMF voiced its approval and said the pound-dollar rate has reached a “genuine equilibrium.”

Remittances from Egyptians abroad -- a crucial source of hard currency -- fell by more than $2 billion dollars to $17 billion last fiscal year, as confidence in the pound plummeted and trading on the black market soared. The central bank said levels are starting to recover, with inflows growing by 12 percent in the fourth quarter to $4.6 billion.

Loans, Aid

Reserves rose to $26.4 billion in January, the highest level since 2011, as authorities leveraged the IMF loan to boost external borrowing from lenders including the United Arab Emirates. China agreed to a currency swap, while Egypt also sold $4 billion of Eurobonds last month -- covering the financing gap for its economic program this year.


The central bank raised interest rates by 300 basis points on the day it floated the pound. Even so, annual core inflation -- a gauge that strips out volatile items -- surged to 25.86 percent in December, the highest level in almost 12 years. That puts pressure on households in a country where about half the people live around or below the poverty line.

Business Activity

Non-oil business activity, which the IMF regards as crucial to the nation’s long-term recovery, has yet to show significant improvement. The Emirates NBD Egypt Purchasing Managers Index has posted a contraction in each of the past 16 months. Higher interest rates meant to keep inflation in check will likely limit growth to just one percent this year, according to Jason Tuvey, Middle East economist at London-based Capital Economics.

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