Cairo - At the end of last month Egyptian voters secured a second presidential term in office for the incumbent Abdel Fatah al Sisi, in a contest where he ran virtually unopposed, receiving 97% of votes. Although voter turnout was just 41.5%, and several instances of voting irregularities were reported, the outcome at the polls certainly saw some favour in the cautious progress that Cairo’s economy is currently seeing, having faced a very hard and particularly drawn-out crisis. In the immediate aftermath of the vote, for instance, Egypt’s Central Bank cut its overnight rates by 100 basis points to 16.75%, and its lending rate to 17.75%, thanks to year-on-year inflation falling to 14.4% in February; it had reached 30% over the previous summer.
During the Fall of 2016, Egypt’s Central Bank had been forced to allow the Egyptian pound to float freely, while it had previously been pegged to the dollar, even though the currency had already undergone devaluation in the previous spring. As a result of that decision, due to the country’s lack of foreign exchange reserves, it practically halved against major currencies, leading to a steep rise in the price of imported goods. Among other things the decision enabled the release of IMF funding worth a total of $12 billion over the next three years, and has allowed Egypt to replenish part of its reserves, thanks mainly to a recovery in the tourism sector.
Last year foreign visitors contributed 5 billion dollars, a figure three times that of 2016. It’s still, however, a far cry from the $12 billion recorded in 2010, the year prior to the deposition of Hosni Mubarack. Attracted by the currency devaluation, foreign investors have also acquired 20 billion in treasury bills, thus helping to increase foreign reserves to 42.5 billion, from 19 billion prior to the signing of the agreement with the International Monetary Fund. Al Sisi can claim another success: a decline in unemployment; during his four-year term of office it dropped from 13.6% in 2013 to the current 11.6%.
Among the Egyptian president’s unpopular measures those that certainly stand out are the cuts to fuel and food subsidies, which while helping, and, still do so to a degree, to improve the lives of millions of Egyptians, they also constituted a weight on the fiscal deficit. And it is likely that new decisions in this direction could soon be taken, now that the hurdle of his re-election has been overcome.
According to the World Bank figures for the fiscal year of 2016, in Egypt the budget year is calculated from the start of July to the end of June - ended with a 4.3% GDP growth, a value that is expected to fall to 3.9% in the current one. From this year exports are slated to start growing significantly (+7%), compared to the worrying weakness they recorded in the recent past.
On this front, Italy’s ENI has played a very important role, given that the growth in oil and gas extraction is largely conducted by that multinational company. The company, led by Claudio Descalzi, has in fact achieved its highest level of production from the Nooros offshore gas field, which reached 32 million cubic meters of gas per day, corresponding to about 215,000 barrels of oil equivalent a day (boe/d). Not for fifty years has an ENI field in Egypt seen higher yields. This important result was achieved following the start of the NW-7 well, the thirteenth drilled site in this field. Output levels are destined to be further improved in June when a fourteenth well, currently being drilled, will come into production, reaching 34 million cubic meters of gas per day, equal to roughly 230,000 boe/d.