Egypt economic conditions will improve: Sisi
Foreign exchange shortage, rise in customs duties bite hard
President Abdel Fattah Al-Sisi said yesterday that tough economic conditions in Egypt would improve in six months and called on businessmen and investors to help the government curb price increases. Speaking at the opening of a fish farm project in the Suez Canal city of Ismailia, Sisi praised Egyptians for the way they had dealt with harsh economic reforms. “The efforts to alleviate those effects are massive,” he said.
Egypt took markets by surprise on Nov 3 when it abandoned its pound currency’s peg to the dollar in a move aimed at attracting capital inflows and weakening a currency black market that had all-but displaced the banks. Hours later, the government hiked fuel prices. The flotation helped the cash-strapped government clinch a$12 billion IMF loan program it hopes will revive growth hampered by political uncertainty since the 2011 uprising that ended Hosni Mubarak’s 30-year rule.
Sisi came to power promising economic reform and stability but problems have piled up. With a budget deficit of 12 percent and a looming funding gap, he was forced to undertake harsh economic measures. Egyptians, many of whom are forced to scrape by from day to day, feel hard-hit by tax rises, soaring food price inflation, and cuts in state subsidies. Prices in the most populous Arab country are likely to keep rising next year, economists say, driven by the reforms.
The main measure of inflation is at eightyear highs above 19 percent, as a foreign exchange shortage and a rise in customs duties bite hard in a country that imports everything from sugar to luxury cars. Egypt raised electricity prices by 25 to 40 percent and introduced a 13 percent value-added tax in August. In his speeches, Sisi has sought to persuade Egyptians that collective sacrifice is necessary to save the country from financial ruin.
Yesterday’s speech he ordered the government to make greater efforts to curb price increases and asked businesses and investors to play their part. “I am not just telling the government, I am also telling citizens, businessmen, and investors: please stand beside your country Egypt for just six months and you will find things much better than they are now.”
New oil and gas deals
In other news, Egyptian Oil Minister Tarek El Molla has signed three offshore oil and gas exploration and production deals worth a total of at least $220 million with France’s Total, Britain’s BP, and Italian oil major ENI’s Egyptian subsidiary IEOC, the ministry said yesterday. The deals include drilling for six wells and a signing bonus of $9 million, the ministry said in a statement, and are the result of a tender called by Egyptian state gas board EGAS. They are all in exploration blocks in the Egyptian Mediterranean Sea. The first deal, with a consortium of BP and IEOC, is worth $75 million for an exploration block in the North Ras El Esh block; the second, with a consortium of all three companies, is in the North El Hammad block and is worth $80 million, and the third, with BP alone, is in the North Tabia block and worth $65 million. Egypt has gone from exporting energy to being a net importer as domestic output has failed to keep pace with rising demand. Saudi Arabia informed Egypt last month that shipments of oil products expected under a $23 billion aid deal had been halted indefinitely. The government is seeking ways to help the country cope and Molla said last week that Egypt wanted to import crude oil directly from Iraq and he hoped to finalize the deal by the first quarter of 2017. The oil sector in Egypt has signed 73 oil and gas exploration deals with international oil companies in the past three years worth at least $15 billion so far, Molla said in yesterday’s statement, and signing bonuses of over $1 billion for the drilling of 306 wells. Earlier yesterday, an EGAS official told Reuters the board had determined Egypt needed around 100 shipments of liquefied natural gas worth $2.2 billion in 2017 and had already secured 60 shipments.