What needs to be done to reignite investor confidence? Even after the float of the EGP and steps towards ambitious reforms underway, investors remain cautious about the local market, so what else needs to be done? We spoke to industry leaders to understand how recent reforms will shape the country’s financial landscape, which sectors they’re banking on, and more broadly their outlook for the coming years.

We brought together some of the country’s leading financial experts at this year’s EnterpriseAM Finance Forum — we spoke to Ahmed Issa, executive board member and deputy CEO of Banque Misr and former tourism minister, Helmy Ghazi, deputy CEO and head of global banking at HSBC Egypt, and Karim Awad, group CEO and chairman of the executive committee at EFG Holding to gain a clearer picture of Egypt’s economic trajectory.

Egypt’s FX market is showing positive signs of stabilization and growth: The market is currently “clearing at the unified exchange rate,” according to Ghazi, with backlogs clearing and a liquid interbank market. Awad echoed this sentiment, highlighting that since the float, foreign investors were able exit large positions smoothly and with relatively few issues. Issa added that a “nascent healthy market” is emerging in Egypt, characterized by a trading range with fluctuations based on market dynamics.

So, what levels should we expect the greenback to change hands at next year? Our panelists couldn’t agree on a number, with Ghazi telling us that HSBC is penciling the USD as EGP 48 by the end of next year and Awad expecting the EGP to settle a “little bit higher.”

And what about rates? “We’re projecting a 1 percentage point drop in 2024, and a 6 percentage point drop in 2025,” Ghazi said. Ideally, this level of monetary easing should be enough to incentivize new investments, he added. The combination of lower interest rates in developed markets and wage levels that have not kept pace with inflation is setting the stage for an “interest rate reduction cycle expected to begin in the coming months,” Issa said.

What will it take for FDI inflows to pick up? “The Egyptian private sector has to invest first before we start seeing foreign direct investment coming in,” Awad said, highlighting that multinational companies already investing in Egypt are the biggest promoters of FDI. “It’s a game of patience. I don’t think our expectation should be that FDI jumps right away.”

Foreign investors are interested: “We’re seeing a surge in inquiries, particularly from Asia and Europe,” said Ghazi. “There’s growing interest across industries like consumer goods and renewables, but it’s still early.”

Are expectations outpacing reality? “If you look at the numbers, Egypt has been the top recipient of FDI in all of Africa consistently for the past five years,” Issa said. Egypt is getting its fair share of foreign investments among emerging markets, so if it feels like our FDI inflows are below expectations that’s because we have “higher expectations of global shifts in capital, of global capital flows into the south in general,” according to Issa.

Investors want concrete evidence the state is pulling back: “It’s almost like a snowball effect…We need to see actual privatization and assets being sold,” Awad said. Traction on long-discussed transactions, particularly in the energy sector, would signal to investors that the government’s commitment to the privatization program is serious, he added. “The main impediment to privatization today will continue to be the valuations…I think at one point, you will have to make a decision: do I need to balance the valuation and the proceeds I’m getting versus the overall sentiment that I will create by undertaking that transaction or not.”

With minimal state intervention, how do we hit our renewables goals? Establishing USD-denominated offtake agreements is crucial for attracting international project financing, according to Ghazi, who highlighted the importance of public-private partnerships (PPPs) for large-scale projects, particularly in renewables and hydrogen.

It’s a long arduous process: “The structuring period takes around a year and putting a financial clause in place could take another two,” Ghazi explained, highlighting the complexity of PPPs. There are also significant challenges with social infrastructure projects, where cash flows are denominated in EGP while project costs are typically in USD, complicating fundraising efforts. Attracting funding for these large-scale projects necessitates long-term private equity and infrastructure investors, according to Awad.

What does all this mean for the banking sector? “We’re expecting double-digit growth in both loans and deposits in 2025,” Ghazi said, noting that current loan growth in the banking sector has been primarily driven by working capital facilities. As more investors come in 2025, “we’re hoping to see a mix of working capital and investment-driven loans, largely due to the anticipated drop in interest rates, which should incentivize further investments,” Ghazi added.

You can’t mention banking without bringing up NBFS: The non-banking financial sector is surprisingly resilient, Awad said, pointing to its low credit losses across leasing, factoring, microfinance, and consumer lending despite economic challenges. “You’d expect larger credit failures, but that hasn’t been the case,” he said.

Tourism: Egypt’s top national project. Awad called the tourism sector Egypt’s “number one national project,” citing its potential to generate foreign revenue with minimal foreign currency input. While Issa echoed the optimism around tourism, he noted that the necessary infrastructure “required for a tourism industry to emerge were not there” until recent government initiatives.

The sector is growing quickly: “This calendar year will see the number of hotel rooms in Egypt rise by the fastest rate compared to the top 30 nations receiving tourism,” Issa said, expressing his confidence in the government’s efforts to expand hotel room capacity, predicting that Egypt could attract 30 mn tourists by 2028-2032 if current growth trends continue.

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