Two revolutions and elections bringing in two new presidents, one with an Islamist background and the other hailing from the military, have been a lot to handle for the country in less than four years. They turned everything upside down in Egypt, from the day-to-day challenges and aspirations of the man in the street to the economic ties the country has with different countries worldwide. The latter were reflected in changes in foreign investment, aid transfers and trade relations. The instability and lack of security following the 25 January Revolution deprived the country of much-needed tourism revenues and foreign direct investment until the middle of 2012. International aid was almost non-existent, with the Arab Gulf monarchies opting not to support the regime that followed the ousting of their long-time ally former president Hosni Mubarak. The lack of foreign currency flows, especially in the light of investment outflows from the stock market and foreigners selling their holdings in Egyptian treasury bonds, stripped the country's foreign currency reserves by almost 60 per cent to reach $14 billion by July 2012. The one-year rule of ousted former president Mohamed Morsi of the Muslim Brotherhood saw better investment flows from his allies Qatar and Turkey. While there was a lot of talk about a 500 million euro additional loan from the EU and a long-awaited IMF loan of between $3.2 and $4.8 billion, these never materialised due to the violence that followed Morsi's controversial Constitutional Declaration at the end of 2012. The toppling of Morsi in the summer of 2013 changed the map of Egypt's allies and thus its trade and aid partners. While the Gulf states full-heartedly came to the rescue of the economy, Qatar and Turkey pulled away and the EU and US preferred to watch and wait. Both the US and the EU have now acknowledged the legitimacy of the new regime and have showed interest in new investment and resumed aid. The Gulf countries are also trying to help Egypt find new sources of aid and investment by organising an investment gathering next March. Moreover, a delegation from the International Monetary Fund visited Egypt in late November to assess the economic situation, and it is expected to extend a loan during the March conference. The country's balance of payments showed a significant improvement during the 2013/2014 fiscal year, recording an overall surplus of $1.5 billion compared to an overall surplus of only $0.2 billion during the previous fiscal year. This was due to a pick-up in transfers associated with the receipt of Gulf country grants, recording $30.4 billion during the 2013/2014 fiscal year, compared to $19.3 billion a year earlier. Foreign direct investment increased by 9.8 per cent during the last fiscal year to reach $4.1 billion compared to $3 billion in the year ending in June 2013. While non-Arab foreigners' transactions did not return to their pre-Revolution levels of 14 per cent of overall transactions, foreigners' net investments on the Egyptian Stock Exchange were reversed from net sales of $0.8 billion to net purchases of $0.4 billion, according to ministry of finance figures. On another positive note, the tourism revenues jumped 112 percent to about $2 billion in the third quarter of 2014 compared to the same quarter of 2013, showing signs of recovery in the sector shouldering the brunt of the political upheaval of the last three years. While foreign reserves showed relative stability in the second half of 2014 , thanks to Gulf aid , the repayment of the $2.5 billion bank deposit back to Qatar resulted in reducing the reserves from 16.91 billion to $15.88 billion, its first decline in six months . The drop could have been deeper but for the Kuwaiti $1billion grant received last month and the $9 billion Emirati loan securing Egypt's oil imports for a year.
The US: Relations with the US witnessed ups and downs after the toppling of Morsi, which the American administrative initially considered, but then failed to officially call, a military coup. Soon after Morsi was removed from office the US froze its annual $1.5 billion in aid to Egypt, a decision it held to after death sentences were handed down against 529 members of the banned Muslim Brotherhood in April. It was only in June, exactly two weeks after the election of Abdel-Fattah Al-Sisi as Egypt's president, that talks about resuming aid began. The tense relations were reflected in an increase in the trade deficit between Egypt and the US in 2013, with Egyptian exports to the US falling by 37.6 per cent to LE8.1 billion, compared to imports of American goods valued at LE35.8 billion. In July, the US released $572 million in military aid to Egypt. This was followed in early November by the US's decision to offer Egypt $200 million in annual programming aid. This pushed the rating agency Moody's Investors Service to rate the move as “credit positive,” which makes the possibility of an upward revision in Egypt's sovereign rating high. Egypt is the second-largest recipient of American aid after Israel, most of which comes in the form of military arms contracts. In October Bloomberg quoted a US Congressional Research Service report that estimated the US aid provided to Egypt between 1948 and 2014 at $74.65 billion. This includes the $1.3 billion a year in military aid from 1987 to the present. In early November the US sent its biggest ever delegation to Cairo, with representatives of 70 companies including Apache and Coca Cola, to study investment opportunities. The visit was seen by many as a clear indication that the rift between the two countries is being repaired. US investments in Egypt reached $654 million in the first quarter of 2012-2013, the last available figure, compared to $577.6 million in 2011-2012 as a whole.
Qatar: In late November, Egypt repaid a $2.5 billion bank deposit made by Qatar. Thanks to financing from the three Gulf allies — the UAE, Saudi Arabia and Kuwait—Egypt has been able to return $6 billion to Qatar since the removal of Morsi in mid-2013. It still has to repay another $500 million due in the second half of 2015. In October, the Central Bank of Egypt (CBE) governor said Egypt was returning the deposits because “they [Qatar] did not ask for renewal.” In early December, according to the governor, Qatar asked the CBE to return the deposits. Qatar, an ally of the Muslim Brotherhood, provided billions of dollars in grants, loans and energy supplies to the Egyptian government during Morsi's presidency. But its relations with Egypt and members of the Gulf Cooperation Council (GCC) deteriorated due to its alleged connections and support for the Brotherhood, which the Gulf countries see as an existential threat. The emirate has received members of the banned group, and its news channel AlJazeera has been accused of acting as a podium for critics of the Egyptian government.
The EU: In 2014 there were talks about the EU signing a Deep and Comprehensive Free Trade Agreement (DCFTA) with Egypt that would see trade between the EU countries and Cairo double. Such an agreement would widen the scope of cooperation far beyond the existing Association Agreement to cover trade in services, government procurement, competition, intellectual property rights and investment protection. Egypt's trade with the EU, traditionally its biggest trading partner, reached around 23 billion euros ($31.4 billion) in 2012, but initial data showed it had dropped a little last year. Egypt has had an Association Agreement with the EU since 2004. During his visit to France and Italy in late November, Al-Sisi saw eight different investment deals finalised. In Rome, deals were estimated to be worth $550 million; in Paris, the total value was said to be $700 million.
Russian Federation: While political and economic relations with the US improved this year, Cairo also started courting Moscow, its Nasser-era ally and main arms supplier, once again. The first official visit of Al-Sisi to a non-Arab country after his election as president was to Moscow, where he discussed setting up a Russian Industrial Zone in the Suez Canal area and negotiating a free-trade zone between Egypt and the Moscow-led Customs Union of Russia, Belarus and Kazakhstan. The two nations were also said to have agreed to a $3 billion weapons deal. Tensions between Moscow and the EU and other Western countries over the crisis in Ukraine bolstered economic cooperation between the two old allies. When Western nations imposed sanctions on Russia, Moscow retaliated by banning most food imports from the United States, the European Union, Australia, Canada and Norway.This gave Egypt a new export opportunity: Egyptian exports of agricultural goods to Russia increased by 30 per cent, and wheat imports from Russia also rose. Egypt is the world's largest wheat importer and the largest single buyer of Russian wheat. It bought 3.6 million tons of Russian wheat in the marketing year to the end of June. Russia also has an impact on Egypt's tourism industry, hammered by three years of political turmoil since the 2011 Revolution: more than 40 per cent of all European tourists who visit Egypt come from Russia.
The Gulf: Countries in the Arabian Gulf have given Egypt significant support since the ouster of Morsi, with Saudi Arabia, the United Arab Emirates and Kuwait providing $10.6 billion in aid over the last fiscal year, according to Egypt's finance minister. In October an additional $5 billion was pledged by Saudi Arabia and the UAE, and a further $1 billion by Kuwait . The UAE'scommitment includes major long-term investments. Many UAE-based companies are interested in investing in Egypt, the most prominent deals being those with Arabtec and Emaar. Private equity group Abraaj Capital says it wants to buy at least 51 per cent of the household brand BiscoMisr, the snack food manufacturer. The inflow of support included much-needed fuel supplies that helped Egypt survive its worst-ever energy shortage. In August, the UAE government pledged to provide Egypt with most of its fuel needs for the upcoming year, starting in September. The $9 billion deal includes diesel, gasoline, fuel oil and butane. Egypt will pay back the value of the oil in quarterly installments over five years starting in 2015. In early November Kuwait announced it will increase its crude oil exports to Egypt by 35 per cent to reach 65,000 barrels per day, giving it priority as a buyer ahead of sales from storage to the Mediterranean market. Kuwait is also considering providing Egypt with diesel fuel. Saudi Arabia sent Egypt $3 billion worth of refined oil products between April and the first week of November.
Turkey: Ties between Cairo and Ankara were strained after Morsi's overthrow. The war of words reached its peak in September when Turkish President Tayyip Recep Erdogan questioned the legitimacy of Egyptian President Abdel-Fattah Al-Sisi in a speech at the UN General Assembly. Cairo retaliated less than a month later by deciding not to renew a trade deal signed in 2012 during Morsi's rule. According to the agreement, Turkish goods received at Egyptian ports on the Mediterranean were transferred by vehicle to ports on the Red Sea and then shipped to the Gulf and Africa. In return, Egypt was allowed to send its exports to Europe via Turkey. In early November, Egypt joined forces with Cyprus and Greece to urge Turkey to stop its exploration for gas deposits in areas of the eastern Mediterranean claimed by Cyprus. Israel: Amid its worst-ever energy shortage, Egypt has been considering cooperation with Israel in the gas sector, but this time as an importer. After months of unconfirmed rumours, it was announced that Israeli Nobel Energy and the Delek Group were in negotiation with Egyptian Dolphinus Holdings to export gas from the Israeli Tamar natural gas field to the Egyptian market. According to reports, the Israeli group will be supplying 2.5 billion cubic metres (bcm) of gas over seven years to the Egyptian private-sector consortium. The imports will be transferred through the same pipeline Egypt used to export its low-priced gas to Israel between 2005 and 2010. Earlier this year a report issued by the Egyptian Initiative for Personal Rights, an independent human rights organisation, revealed that contracts signed during the rule of former president Hosni Mubarak had allowed the export of billions of cubic metres of underpriced natural gas to Jordan, Spain and Israel. The estimated losses to Egypt were put at $10 billion.
