Egypt's recent presidential elections, won overwhelmingly by incumbent President Abdel-Fattah Al-Sisi, put the focus on the country's stability seven years after the 25 January Revolution, as well as on the recovery of the economy, the modernisation of state institutions, and the work done to attract foreign investment. The Egyptian government's economic reform programme, launched in mid-2014 and backed by a $12 billion loan from the IMF in November 2016, has been showing considerable progress. Fiscal consolidation has been strengthening, and vital income-generating sectors of the economy such as tourism are gradually returning to normal levels. Egypt's foreign reserves hit the highest mark in the country's history at $44 billion at the end of April. International lenders such as the IMF and the World Bank, as well as the main international credit-rating agencies, have praised the reform programme as Egypt has liberalised its foreign-exchange system, floated its currency, and introduced reforms to its tax and energy subsidies. The continuity of this programme will be one of the achievements of President Al-Sisi in his second term, with experts arguing that any retreat from the reform polices is no longer an option. Al-Sisi's second term in office will provide additional support for the reform policies to continue, while any social discontent from the burden of inflation fades. This strong leader who ousted Islamist former president Mohamed Morsi after a popular uprising against Muslim Brotherhood rule in 2013 has enjoyed overwhelming public support not only due to his role in overthrowing the Muslim Brotherhood, but also because of the development mega-projects that have been undertaken during his first term in office, especially in roads, social housing, electricity and basic infrastructure. His popularity was challenged when the government started to implement the reform programme, resulting in significant prices hikes, but the improvement in macroeconomic indicators over recent months has restored support for the president. In the meantime, foreign investors favour policy predictability, and Al-Sisi's second term in office is sure to be welcome to them. Al-Sisi's second term will continue the economic reforms, despite some of them being unpopular among sections of society. It paves the way for a continuation of the market-friendly shift in policy-making seen over the past two years. This is now starting to bear fruit, and investors have shown increased interest in the Egyptian market over the past few years as security conditions have started to improve and the government has made real economic-reform efforts, including a new investment code, more investor-friendly incentives, and tax cuts. The flow of foreign investment and the continuity of the economic reform programme will benefit the country in the medium and longer term. The weaker pound has made Egyptian assets more attractive, and capital inflows have strengthened, enabling the Central Bank of Egypt (CBE) to rebuild its foreign-currency reserves. The floatation of the pound has raised the country's external competitiveness, resulting in a rebound in manufacturing activity. A stable foreign-currency system during Al-Sisi's second term will be very positive for industry, exports, and the banking system after previous periods of instability. These things could improve Egypt's low investment rate, boost productivity and create jobs for the country's burgeoning population. The IMF team that has been visiting the country to review progress on economic reforms has praised the government's efforts. In January, the IMF said that these had yielded results in terms of restored market confidence, strengthened growth momentum, a narrowing of budget and current account deficits, and more adequate foreign exchange reserves. The reforms were progressing, the IMF team noted, though it also said that certain risks remained. It urged Egyptian policy-makers to remain committed to policies that would solidify macroeconomic stability and advance structural reforms. Those are the real challenges at this stage, and if Al-Sisi's first term in office is any guide, the government is up to meeting them.
The writer is an economics commentator based in Riyadh.
