CAIRO/DUBAI: Encouraged by Egypt’s economic reforms, a major gas find, streamlined business rules and a devalued currency, investors are increasingly optimistic about prospects for the North African country after years of political turmoil.
Foreign holdings of Treasury bills hit a record high in December, foreign inflows into the stock market last year were the highest since 2010 and direct investment by foreign firms and private equity funds is on the rise again.
Key for many longer-term foreign investors are the natural gasfields that have come on stream in the last few months, including the offshore Zohr field, whose estimated 30 trillion cubic feet makes it the largest in the Mediterranean.
Iyad Malas, a Dubai-based partner of private equity firm Gateway Partners, said Zohr “will be a game changer for Egypt” and the company’s fund, which invests in Asia, the Middle East and Africa, is looking at several opportunities in Egypt.
The gas discoveries should eventually make Egypt a gas exporter and boost its plans to become a regional energy hub.
Besides the gas, private equity firms say reforms launched since the end of 2016 that secured a $12 billion loan program from the International Monetary Fund (IMF) have shifted sentiment enough to spur investment, despite the risks.
One of Egyptian President Abdel Fattah El-Sisi’s biggest challenges is to end an Islamist insurgency which has started to shift its attacks from the remote Sinai peninsula to larger cities.
Investors, however, say they are more concerned the government might deviate from reforms agreed with the IMF, such as cutting energy subsidies further, to keep voters on side ahead of presidential elections this year.
Investors also want inflation to fall and for the government to press ahead with reforms to tackle the red tape that has left Egypt ranked 128 out of 190 countries in the World Bank’s ease of doing business index.
’Economic outperformer’
Since November 2016, Egypt has devalued its currency, removed limits on foreign currency transfers, lifted hard currency restrictions for importers, cut subsidies for domestic fuel and raised value-added tax.
“We’re very positive on Egypt,” said Karim El Solh, co-founder and chief executive of Abu Dhabi’s Gulf Capital, which has invested some $200 million in Egypt.
“In the region, it is set to be the economic outperformer in 2018, especially after these very strong and needed structural reforms,” he said.
Investment by overseas investors in short-term, liquid instruments such as Treasury bills has been heavy since Egypt devalued its currency and raised interest rates.
Throughout 2017, investors snapped up bills with maturities of three to 12 months yielding as much as 22 percent. By early December, foreign holdings of Treasury bills had hit a record 338 billion Egyptian pounds ($19 billion), up from 532 million pounds in mid-2016, central bank data showed.
In US dollar terms, foreign holdings of Treasury bills are now nearly three times the previous high in 2010 — with about half the investment coming in the last few months of 2017.
Charles Robertson, global chief economist at Renaissance Capital, estimates the Egyptian pound is 16 percent undervalued compared to its long-term average and with inflation coming down from its 2017 peak of 33 percent, Egypt remains one of the most attractive emerging markets.
The stock market, which has a capitalization of $45 billion, has also benefited from net inflows of foreign funds, which came to 7.5 billion pounds in 2017, the highest since a record 8.4 billion pounds in 2010, according to exchange data.
Since the pound floated on Nov. 3, 2016 — slumping from 8.8 to the dollar to 17.7 now — the Egyptian blue-chip index has climbed more than 70 percent.
Robertson expects the rally to continue for the next two years now the shock of the 2016 currency devaluation has passed, economic growth is picking up and high inflation is receding.
Direct investment
More importantly for Egypt’s longer-term stability, investment by foreign companies and acquisitions by foreign private equity firms are rising — the kind of commitment that is less likely to be affected by short-term market fluctuations.
Economists say the fact Egypt has a population above 90 million, the third highest in Africa behind Nigeria and Ethiopia, coupled with a young and growing labor force make it an attractive destination.
Net inflows of foreign direct investment into Egypt came to $7.9 billion in the year to the end of June, according to government data, helped by the energy sector. While below the government’s $10 billion target, it was the fourth annual increase in a row and the highest since $8.1 billion in 2008-09.
Inflows peaked at $13.2 billion in 2007-08 before plummeting to $2.2 billion in 2011 during the Arab Spring uprising that ousted long-serving President Hosni Mubarak, disrupted the economy and ushered in years of political instability.
Partly because of the improving outlook for gas supplies and a growing solar power industry, foreign private equity firms are expecting a surge in investment in the energy sector.
Hashem Fouad, chief investment officer at Dubai-based Enara Capital, said his firm was working with Chinese interests on opportunities in Egypt.
“We achieved financial closes worth $200 million in the renewable energy sector in 2017 and expect more deals this year,” he said.
Others are focusing on sectors likely to benefit as the economy expands, and exporters helped by the weaker currency. Solh at Gulf Capital said his firm was looking at companies in health care, education, water and food.
“We are backing companies that are very export-oriented, earning hard currencies in dollars or euros so we are partially hedged to the currency,” he said.
Gateway Partners is also focusing on export-orientated sectors and consumer industries.
“We believe sectors related to consumer — retail, real estate, health care and education — and export manufacturing industries like textiles, agri-processing, and many other manufactured products are attractive,” said Malas.
The impact of the devaluation on exports and imports, coupled with the surge in foreign fund inflows, has also helped Egypt start to address the chronic trade deficit and balance of payments problems that have plagued the country for a decade.
The central bank’s foreign reserves surged to $37 billion in December from just over $24 billion a year earlier, while gross domestic product growth accelerated to 5.2 percent in the July-September quarter from 3.4 percent a year ago.
Surge in foreign fund inflows sets stage for Egyptian boom
Surge in foreign fund inflows sets stage for Egyptian boom
China’s central bank governor highlights key challenges for emerging markets at AlUla conference
- Pan Gongsheng emphasized need for proactive policy measures and strengthened multilateral cooperation to enhance economic resilience
- He said increasing geopolitical conflicts and protectionism disrupt international value chains and restrict flow of capital, technology, and labor
RIYADH: Emerging market economies are facing escalating challenges, including geopolitical tensions, sluggish global growth, financial volatility, and increasing public debt, according to the governor of the People’s Bank of China.
Speaking at the two-day AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the International Monetary Fund, Pan Gongsheng emphasized the need for proactive policy measures and strengthened multilateral cooperation to enhance economic resilience.
“In my view, emerging markets face four key challenges,” Gongsheng said. “The first challenge is geopolitical tension.” He highlighted how increasing geopolitical conflicts and protectionism disrupt international value chains and restrict the flow of capital, technology, and labor.
“There has been a drop in global growth and productivity gains and the rising divergences in key industries across countries, mainly due to uneven development and resource misallocation,” he said.
Gongsheng’s remarks align with the IMF’s recent report, which warns that friendshoring — the practice of countries trading primarily with geopolitical allies — could reduce global economic output by up to 1.8 percent.
Emerging markets, particularly in Asia, may experience up to 6 percent declines due to this shift.
Despite these warnings, a Financial Times report said China has intensified its control over technology and resources, including restricting key battery technology exports, disrupting global value chains, and escalating geopolitical tensions.
Gongsheng identified the second challenge as the slower medium-term growth of the international economy.
“We are now facing policy uncertainties in some economies. If protectionism escalates, rising trade fluctuations will drive up inflation expectations and undermine medium-term growth,” he added.
Citing IMF forecasts, he said global economic growth is projected to hover at just 3 percent in the medium term, the lowest level since 2000.
Financial market volatility and capital outflows represent the third major challenge.
“The trajectory of the interest rate in major advanced economies remains highly uncertain,” Gongsheng said.
“Markets have become particularly sensitive to unexpected economic data. If rates differ and rise significantly from market expectations, market repricing may increase asset price volatility in emerging markets.”
This aligns with a recent Reuters report, which said emerging markets are facing significant challenges due to a strong US dollar and high treasury yields.
These factors have led to weaker local currencies, increased costs for servicing dollar-denominated debt, reduced capital inflows, and dampened economic growth.
Policymakers in these regions find it difficult to counteract these pressures effectively, which are further heightened by new US tariff and trade policies.
The fourth issue Gongsheng discussed was the burden of high public debt and its implications for financial stability.
“The IMF points out that global public debt risk has risen significantly due to political and other factors. Those risks not only exist in developing countries — the level of public debt in some advanced economies also merits close attention,” he said.
He warned that growing investor concerns over fiscal sustainability could trigger government bond market volatility, with potential spillover effects on other asset classes, liquidity risks, and financial stability.
According to a report by the Institute of International Finance, the global debt stock increased by over $12 trillion in the first three quarters of last year, reaching nearly $323 trillion.
The IIF attributes the rise to declining borrowing costs and a heightened risk appetite among investors, underscoring concerns similar to those expressed by the governor.
To address these challenges, Gongsheng outlined key policy responses for emerging markets.
“First, we should continue improving monetary policy frameworks, enhancing the efficiency of monetary policy transmission, increasing policy transparency, and improving policy communication,” he said.
He also advocated for increased exchange rate flexibility, stronger public debt management, improved macroprudential regulations, and the development of local currency markets to mitigate capital flow risks.
Gongsheng stressed the importance of multilateralism and global financial governance reform.
“The IMF has made great progress in surveillance and governance reform. At the same time, there is still more work to be done for us to advance global financial governance reform,” he said.
He called on the IMF to enhance support for developing countries, promote trade and investment liberalization, and establish comprehensive policy tools to help emerging markets address capital flow risks and external shocks.
“The current quota shares can no longer reflect the actual position of emerging markets in the global economy,” Gongsheng said, urging the IMF to establish a “concrete and binding timetable” for future quota realignments, with discussions on fiscal realignment plans set by June.
Ministers urge fiscal discipline, smart investment to tackle debt challenges
RIYADH: Effective debt restructuring requires a thorough understanding of its root causes, said the Russian finance minister at the AlUla Conference for Emerging Market Economies.
Speaking during a panel titled “High Debt-Low Fiscal Space—Fiscal Consolidation and Multilateral Solutions to Debt Restructuring,” Anton Siluanov emphasized that fiscal prudence and policy monitoring are essential in addressing economic challenges.
“When we restructure the debt, we must be fully cognizant of the underlying causes,” Siluanov said, stressing the importance of careful analysis before implementing financial adjustments.
He further underscored the responsibility of finance ministries to adopt prudent fiscal policies, ensuring that governments do not exacerbate their debt situations. “If it’s difficult to cut costs, don’t blow them, don’t increase them,” he warned.
The panelists highlighted the need for efficient and targeted financial measures. Mauricio Cardenas, a professor at Columbia University and former Colombian finance minister, argued against indiscriminate budget cuts, saying: “I don’t believe in across-the-board cuts in government expenditures because governments have priorities, countries also have priorities.”
Instead, he called for channeling financial resources more effectively to stimulate economic growth and stability. “In essence, channeling more financing, making sure that financing is more efficient is crucial.”
Saudi Finance Minister Mohammed Al-Jadaan reinforced the importance of strategic financial planning, urging countries to “utilize your fiscal space in the most optimal way.”
His remarks were particularly relevant in the context of Saudi Arabia’s economic positioning, as the Kingdom continues to lead major financial initiatives in the region.
Zambian Finance Minister Situmbeko Musokotwane pointed to investment opportunities in resource-rich nations, particularly critical minerals necessary for global decarbonization efforts.
“Countries like Saudi Arabia, with a lot of financial capital, the good news is that with the efforts to decarbonize the materials—copper, manganese, nickel, and so forth—they’re in my country, so come and invest,” he said.
The discussion underscored the necessity of maintaining fiscal discipline while ensuring targeted investments that drive sustainable economic growth.
The panelists agreed that careful financial oversight, efficient resource allocation, and strategic investment remain central to overcoming debt challenges in emerging markets.
The two-day summit, held in the Arabian oasis of AlUla, aims to generate actionable recommendations to strengthen financial stability and promote sustainable growth in emerging economies.
Key discussions will focus on the role of artificial intelligence and digital transformation in driving economic progress. Participants will explore strategies for enhancing economic resilience and fostering stronger cooperation between emerging and advanced economies to promote a more equitable and sustainable future.
Financial discipline crucial while pursuing economic diversification efforts: Qatari minister
- Qatar’s minister of finance said Middle East countries have engaged in healthy competition as they pursue economic diversification
- He was speaking during a panel discussion at the AlUla Conference for Emerging Market Economies
RIYADH: Maintaining financial discipline is crucial for countries in the Middle East as they work to diversify their economies and reduce reliance on energy revenues, according to a Qatari minister.
During a panel discussion at the AlUla Conference for Emerging Market Economies organized by the Saudi Ministry of Finance and the International Monetary Fund, Ali bin Ahmed Al-Kuwari, Qatar’s minister of finance, said that countries in the Middle East have engaged in healthy competition as they pursue their economic diversification journeys.
Saudi Arabia’s Vision 2030, Qatar’s Vision 2030, and the UAE’s Vision 2031 programs are focused on transitioning from a hydrocarbon-based economy to a knowledge-driven one.
These initiatives also aim to strengthen non-energy sectors, which include tourism, hospitality, manufacturing, and technology.
“While we build the diversification, it is very important to have a long-term view of how we see things change in terms of revenue and expenditure. The fiscal policy framework in Qatar builds different scenarios for revenue. We build discipline around the spending so the spending goes to the right places. We make sure that surpluses go in the right direction,” said Al-Kuwari.
He added: “Surplus goes to the Qatar Investment Authority because it is Qatar’s revenue diversification engine. A part of the surplus also goes to the shock absorption buffer by enhancing the Qatar Central Bank reserves. Part of it is also reinvested in the economy itself to achieve diversification.”
According to the minister, countries including the Kingdom, the UAE, Bahrain, Kuwait, and Oman are all diversifying their economies effectively.
“Saudi, UAE, Bahrain, Kuwait, Oman everyone is working together. It is a healthy competition. We are also complementing each other,” the minister said.
He also said that Qatar’s economic diversification is based on four sectors, including technology, low-carbon manufacturing, logistics, and tourism, adding that the nation has already started seeing the results.
“In tourism, during the World Cup in 2022, we received 2.3 million visitors. In 2023, the year after the World Cup, visitors increased to 4 million, and in 2024, we welcomed 4 million,” said Al-Kuwari. The Qatari minister also said his country seeks to increase the production of liquefied natural gas by 80 percent in a phased manner by 2030, and it will help ensure a sufficient energy supply in the world.
During the event, which was held in the historic city of AlUla and runs from Feb. 16— 17, Jin Liqun, president and chairman of the Asian Infrastructure Investment Bank, said the entity is closely cooperating with other multilateral development banks to assist the funding needs in emerging economies.
“We do not work alone, as a new institution, we work with our peer institutions, and other members of the MBD family. We develop our policy lending to support the countries’ efforts toward net zero,” said Liqun.
He added: “We provide local currency financing. We can help countries to avoid currency risks, and also we believe that it is important to introduce climate-resilient debt crisis financing. This provides temporary relief after climate disasters. We have a soft fund window to help reduce the costs of infrastructure investments.”
Liqun further said that the Asian Infrastructure Investment Bank is assisting emerging economies in positioning themselves within the global green economy and accessing its value chains.
“The green transition is a major opportunity for emerging countries, especially countries in the Gulf Cooperation Council regions. This is a great opportunity for GCC countries to develop sustainable and resilient economies,” added Liqun.
The Dean of the School of Economics and Business at the University of Chile, Jose De Gregorio, said emerging markets should continue doing what they are doing now but should also effectively address the potential risks as time progresses.
“Emerging markets should keep doing things which they are doing now. However, there are risks which we have to take into account and be prepared for. First, fiscal policies are not as strong as they were fifteen years ago. Why? Because we have spent a lot of money during the previous crisis. The second one is the geopolitical thing,” added De Gregorio.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, said countries should possess a deep knowledge of their economies before making strategic fiscal policy decisions.
“My experience has been that it is important for economies to understand their own economies and not just necessarily go in line with what everybody else is doing,” said Cardoso.
Saudi Arabia’s Northern Borders region holds $1.22tn in mining resources
JEDDAH: Saudi Arabia’s Northern Borders region, home to an estimated SR4.6 trillion ($1.22 trillion) in mineral resources, is emerging as a key driver of economic growth and investment, according to the Ministry of Industry and Mineral Resources.
The region is a major hub for phosphate production, a critical component in global food security due to its use in agricultural fertilizers. Mining projects in Waad Al-Shamal, an industrial city dedicated to the sector, have positioned Saudi Arabia among the world’s leading phosphate producers and exporters.
As part of Vision 2030, the Kingdom is accelerating efforts to develop its mining sector and reduce its reliance on oil and gas. The ministry has identified mining as a key pillar of economic transformation, focusing on resource efficiency and attracting both local and international investment.
Jarrah bin Mohammed Al-Jarrah, spokesman for the ministry, said the region contains significant deposits of phosphate, coal, dolomite, limestone, and silica sand. It also has five phosphate ore sites and 29 active mining licenses, including 15 for building material quarries and 14 for mineral exploitation.
Beyond mining, the Northern Borders region is expanding its industrial footprint, with 61 factories operating across Arar, Tarif, and Rafha in sectors such as building materials, food processing, and chemicals, Al-Jarrah said.
The developments come as minister of industry and mineral resources Bandar bin Ibrahim Al-Khorayef began a visit to the region on Feb. 16 to assess industrial and development projects aimed at strengthening its role as a mining hub. His visit aligns with the ministry’s broader strategy to attract investment and position mining as a key sector in Saudi Arabia’s economic diversification.
Saudi Arabia’s mining ambitions have gained significant momentum in recent years. At a meeting in July, Alkhorayef highlighted that the estimated value of the Kingdom’s mineral wealth had surged from $1.3 trillion to $2.5 trillion by early 2024 — a 90 percent increase — driven by government investments in geological surveys, exploration, and private sector participation.
The rise in valuation reflects a more comprehensive understanding of the country’s vast mineral potential, as well as increasing demand for critical minerals needed for global energy transitions.
Global financial leaders convene in Saudi Arabia to address emerging market risks
RIYADH: Sovereign debt risks, structural reforms, and trade policies take center stage as global financial leaders and policymakers convened in Saudi Arabia for the first AlUla Conference for Emerging Market Economies.
The high-profile summit comes amid ongoing economic turbulence, with leaders seeking solutions to enhance financial stability and resilience.
The two-day event, hosted by the Saudi Ministry of Finance in partnership with the International Monetary Fund, is being held from Feb. 16— 17 in AlUla. The historic site is fast becoming a venue for strategic economic dialogues, underscoring Saudi Arabia’s efforts to assert itself as a key player in shaping financial policies for developing economies.
The conference aligns with the Kingdom’s broader efforts to solidify its role as a hub for global economic dialogue and under Vision 2030, it continues to lead economic diversification initiatives, emphasizing collaboration and innovation to navigate global economic shifts.
Saudi Minister of Finance Mohammed Al-Jadaan highlighted the conference’s role in addressing common economic challenges and fostering a more inclusive and resilient global economy.
“Today, we will explore ways to address our shared challenges so we can build a stronger global economy that is durable and inclusive for all nations,” he said.
Al-Jadaan stressed the importance of international cooperation, adding: “There is no pathway more effective than broad multilateral cooperation, and that work starts with conversations like the ones we are having at this conference.”
One of the key challenges addressed during the opening ceremony was sovereign debt, which Al-Jadaan described as a threat to economic progress.
“Since we all share the benefits, we should also work together to address structural risks like sovereign debt, which threatens development gains,” he said, adding that innovative solutions, including improving global debt restructuring frameworks, are necessary.
IMF Managing Director Kristalina Georgieva echoed Al-Jadaan’s statements, emphasizing the importance of emerging markets in global economic stability. “You, the leaders in this room, have weathered the shocks of the past few years remarkably well, and your economies have delivered two-thirds of global growth,” she said.
Georgieva called for the need for agility and resilience in the face of economic uncertainty. “Emerging markets will need to be agile, adaptable, and resilient,” she added, pointing to key areas such as inflation, high debt, and structural reforms that require urgent attention to improve competitiveness and productivity.
She also praised Saudi Arabia’s leadership in establishing a dedicated space for emerging markets to discuss critical policy issues. “Minister Al-Jadaan not only identified a gap in terms of space for emerging markets to discuss policy issues of common interest, but he decided to close it,” she said.
Georgieva spoke of the IMF’s newly established regional office in Riyadh, emphasizing its pivotal role in realizing this vision. The office — the first of its kind in the Middle East and North Africa — was inaugurated on April 24 last year during the Joint Regional Conference on Industrial Policy for Diversification, co-hosted by the IMF and the Saudi Ministry of Finance.
She stressed the importance of mobilizing more resources for the IMF’s Poverty Reduction and Growth Trust. “The IMF needs more capacity to help vulnerable countries and to continue to adapt to evolving challenges.”
Looking ahead, Al-Jadaan called for global economic cooperation that benefits all stakeholders. “We should be laser-focused on improving the lives of our people.
“We must find common ground to serve the common good and seek win-win solutions, fostering productive cooperation between East and West, South and North, to create a positive spillover for our neighbors and trading partners.”
The conference is expected to generate actionable recommendations that will support emerging economies in enhancing financial stability and sustainable growth. Discussions will also explore how artificial intelligence and digital transformation can drive economic progress in developing economies.
Participants are set to discuss strategies for economic resilience, aiming to strengthen cooperation between emerging and advanced economies for a more equitable and sustainable future.
