A new economic narrative

Patrick Fitzpatrick:

Let's get to it. Our first guest this morning is her excellency Dr. Rania Al Mashaat, Minister of Planning, Economic Development, and International Cooperation of Egypt. Dr. Rania will be in conversation with Moustafa Bassiouny, who is a partner here at Enterprise and our first editorial employee.

Moustafa Bassiouny [M.B]:

Dr. Rania, you are the Minister of Planning, Economic Development, and International Cooperation. Thank you so much for being with us here today. 

We believe that our core mandate as the publishers of EnterpriseAM is to turn standard corporate and government talking points into actionable, vital, and honest conversations for the benefit of the business community here at large. 

As Patrick mentioned earlier, the theme of our gathering this year is to future-proof Egyptian businesses, which is very well timed because of the recently released National Economic Narrative. I saw it printed for the first time, the first very thick plan that involves a lot of coordination with a lot of ministries and a lot of state institutions to achieve real and measurable growth targets for the economy. 

Can you briefly tell our audience what the core pillars of the plan are and what do they mean for the private sector?

Rania Al Mashat [R.M]:

First, good morning and it's a pleasure to be here with everybody, and also a big salute to Enterprise. Your impact in terms of communicating what's happening helps very much anchor expectations. Anchoring expectations is a very important objective—objective for governments, objective for central banks, objective for businesses. When we say anchoring expectations, it means that you need to be clear. You need to be clear with your policies. You need to be clear with the tools that you're going to use to be able to reach your objectives.

And this brings me to our economic narrative. The reason why we came out with Egypt's Narrative for Economic Development—and the rest of it is policies for growth, jobs, and resilience.

In the introductory remarks that were mentioned, the private sector needs to be the engine of growth. Number two, we need to have an economy that focuses more on high-productivity sectors, one that pushes more exports, and makes use of the opportunity we have with what's happening globally to be able to realize Egypt's comparative advantage. 

This is very important.

Why are we trying to do this? We want to move from the impossible trinity that we all know about, into a continuous circle. This continuous circle is one where macroeconomic stability, which we have reached, is maintained, through fiscal, monetary, and governance of public investments. That is coupled with continuing reforms on the structural side—the real economy— and that leads to economic development; more exports, creating more foreign exchange, which pushes macroeconomic stability. So it's a continuous cycle — macroeconomic stability is a key objective, the first chapter, the beginning of being able to change the structure of the real economy so that we can realize the opportunities we have around us but also benefit from the comparative advantage of this economy.

M.B: So this cycle charts a path forward for Egypt as a whole: developing the economy, deepening some of the fundamentals for the future. But how will we know that we're on track? What are the key metrics that for you are non-negotiables that we should follow, that any investors and our readers should also keep an eye on? Beyond of course the traditional measures of GDP or inflation metrics or stuff like that?

R.M: So a few things. The big fiscal and monetary reforms that took place in March 2024 happened a few months after one of the most serious geopolitical shocks for the region and for the world. So the political commitment to reform is there. So March 2024 is a shifting point.

Fast forward, when you take a look at the recovery you were seeing in GDP—and as a macroeconomist, ex-central banker, in government for eight years, and ex-IMF, you always want to look beyond the macro number. Where is GDP growth coming from? And this reflects also on the introductory remarks that were said a few minutes ago. When you take a look at the recovery in GDP, we're averaging this year 4.4%. Last quarter was 5%. You take a look, it's all coming from industry, ICT sector, tourism, with a negative contribution from the Suez Canal and a negative contribution from one of the key sectors — which was behind Egypt's growth story between 2005 and 2008 — which was oil and gas. So despite the headwinds and the negative contribution from some of the most stable and traditional and conventional sectors, GDP is really being pushed by what all of you here are actually contributing to: more industrialization, i.e., more productive sectors, more competition.

When you take a look at the type of industries that have been pushed forward, it has to do with pharmaceuticals, it has to do with manufacturing of vehicles, it has to do with textiles, it has to do with some of the chemical production. So it's a very diversified industrialization. You take a look at tourism, benefiting from a lot of the infrastructure that was put in in the past few years, we're at an all-time high. And with the outcome of the UNESCO yesterday [appointment of former Tourism Minister Khaled El-Enany as Director-General], the opening of the Grand Egyptian Museum November 1st, next year is also going to be a continuation of a rebound there. And then other sectors are also key contributors.

So when you take a look at GDP from an activity side, it's very diversified sectors that have high employment multipliers. So, when we're looking at an economy with a youth bias, these are sectors which are very important to try and overcome unemployment rates. If I'm looking at the expenditure side — and this is key for all the investors here — you will see that when we look at total investments, 57% is coming from the private sector. This is on the back of very strict ceilings we have on public investment, but also a lot of the reforms that are taking place to ease business, to create more competitive neutrality when it comes to some of the exemptions that the government gave to state companies, which the Ministry of Finance has been pushing forward, many issues related to the licensing of industrial land.

So there's a list of structural reforms, and I invite everybody to look through the narrative because we have them time-bound. So you can come when we meet next year and say, "You told us in December 2025 you're going to do this. Did you do it or not?" So this is also part of trying to close a credibility gap by communicating very clearly what we're going to be doing on each of the structural reforms. 

And let me, for the benefit of everyone, Egypt's structural reform program is based on three key pillars: first, maintaining macroeconomic stability; second, pushing more competitiveness and increasing private sector engagement; and the third is the green transition.

M.B: So, we look forward to holding you to that next year…and being able to assess where we are.

R.M: Yes, absolutely — if I am still around. 

M.B: But you mentioned employment, and this is one of those things that we are all worried about right now. The plan itself, the National Economic Narrative, talks about moving away from non-tradable sectors to tradable sectors. An example that was given for non-tradable sectors is construction and real estate. 

Construction and real estate employ a very large number of people who could be considered low-skilled, and probably very difficult to upskill or reskill or move into different sectors. So my question for you, how do we manage the risk of potentially starving such a high-employment sector of those people? This seems a bit risky.

R.M: So, a few points. First, they are not mutually exclusive. When you take a look at the amount of work that's happening, even if new companies are coming in. In addition to the high-skilled labor. In the narrative, we have a full section on dissecting the labor market, trying to push more on vocational training, which is linked to technical schools, and these are technical schools that are taking place through PPPs. So this is also an opportunity for private sector engagement for anyone who also wants to benefit from the demographic dividend that we have.

Yesterday, I was at the graduation of one of the universities in Egypt which is very focused on AI and also the R&D which is taking place for some of the IT companies here in Egypt. Outsourcing is another important sector which benefits from the youth which is talented here. 

So when we look at employment, there is a spectrum of different jobs, different skills, and what we're trying to do is to ensure that the model of Egypt's economy is one where we go into sectors that are of higher productivity, and also ones with higher employment multipliers, and that we are able to see the skill sets with certification that is available. So that is something which we explain in quite detail. And also, with the targets that we have, when we meet next year, we'll be able to also match that with what we're seeing in the sources of growth.

M.B: To where we are right now.

R.M: Absolutely. 

M.B: But let me ask you the same question but from a different perspective. Because, for example, us at Enterprise, we are terrified at what the prospect of AI will do to the jobs that we create, and for the jobs of the future in general. There is a lot of emphasis on nearshoring, offshoring, ICT services in the plan itself. Are these the jobs of the future? Are these jobs that are immune from the growth in AI? 

R.M: So, you know, we go through this in detail and one of the very high employment multipliers in the country is tourism, for instance. As an ex-Minister of Tourism, you have an employment multiplier which is one-to-three. Every direct job, you have three indirect jobs. Very difficult to replace by AI. So there are still several opportunities in sectors which will need… even if you're using programming or a machine, you need somebody to be able to dissect that data, to analyze that data. If we're looking at health care, somebody needs to also be there. So, you know, when you say that "we are terrified," there are so many other things to be terrified of as well. But the point is, how are you able to use these different, I would say, not risks but challenges. Shift them into opportunities, and make use of the interest that we're seeing from different companies here in Egypt that are coming in.

I'll give you for example, when we say, for instance, textiles are being very important today, the exports of textiles are growing, the interest from different countries from the East to come and invest in Egypt – all of these companies are in Upper Egypt. Upper Egypt needs more employment, so this is an opportunity. If I'm taking another company that is investing in renewable energy, it's going to be opening up a company in Nagaa Hammadi. So I really want everybody to look not just at the companies here but also at the geography. In the narrative, we also put the comparative advantage of the different governorates and link them to the industrial objectives that are there.

M.B: But these are initiatives that require a lot of upfront investment as well. And you're an economist, you'll probably appreciate my attempt to skate down the Phillips curve and talk about interest rates right now. For a lot of companies, the central bank from their perspective has delivered stability, but that came at the cost of interest rates that are too high, that have made borrowing almost impossible. Are there any policies within the plan or initiatives by the government or the Ministry of Planning that allow companies to be able to take on risky investments right now?

R.M: Thank you for that question. Many of the companies that are here are benefiting also from concessional finance from different IFIs. If I'm looking at the European Bank for Reconstruction and Development, EBRD; if I'm looking at IFC, International Finance Corporation. We have been able… Egypt has been a platform for the different IFIs to work together to finance the private sector in Egypt. In four years, more than 16 billion [have been allocated] to the private sector, whether through credit lines, whether through increase in equity, through concessional finance — and this is extremely important. Everybody talks about "financing for development", "financing for development." Please take a look at the companies with their names. We also have a platform called HAFEZ, the Hub for Advisory, Finance and Investment for Enterprises, where we put not just financing but the technical assistance that you can get—grants. When we talk about the green transition, we have a country platform, NWFE: Nexus of Water, Food, and Energy, and I see many of the banks and the IFIs and bilateral partners who have contributed to all of this - this is money that goes to the private sector. So the private sector in Egypt, be it private Egyptian or foreign, has been able to benefit from financing that comes from the international community.

Most recently, as part of our comprehensive partnership with the EU, we have an investment guarantee for 1.8 billion Euros. What does that mean? Through this money, you can leverage more financing from EBRD or EIB for the private sector in Egypt. So these are all tools which we have advertised. We need to use your platform so that we can reach more people and show the real examples of how companies—I don't want to mention names, but very important companies—have benefited from Egypt's very strong relationships with the international community to be able to draw in cheap financing compared to local financing.

You're talking about interest rates. A few points. Clarity of policy, I think that is the key point to be able to continue your investments. Nobody wants to work in a high-inflation context. Sometimes, and as a monetary policy economist, in order to regain credibility, real interest rates are kept high for some time so that you are able to regain that credibility. The central bank, in their statements, very clearly explains what the target is when it comes to inflation. When we take a look at fiscal objectives, monetary objectives, governance of public investment, if that is maintained, macroeconomic stability is maintained. And that's the only way that we can guarantee the continuation of the rebound in GDP that we are seeing today.

But finally, please take a look at real credit from the banking sector to the private sector. You will see that that is moving upwards. And I'm talking real credit. And we take a look at where this real credit is going. It's going to the industrial sector. So we have a very consistent story, a very consistent narrative of policies that are being taken into place, being reflected on different sectors.

Within the narrative, the first chapter is on macroeconomic stability. We do not want to forgo that. We do not want to go back to the days where there was no clarity on the macro side. But we're doing so much to change the structure of the economy. Everybody says countries focus only on the financing needs and on the macro, and they forget about the real economy.  Here we are saying no, we're very much focused. We're focused on an industrial policy, an FDI policy, a trade policy—and I know my colleague Hassan [Al Khatib] is going to be talking about his new document on trade, first time since the 2000s—and then how we relate that to vocational training and then localization at the governorate level. 

All of this is tied together with a very clear structural reform program under the three pillars I mentioned, and then consistently giving you a list of targets that you can follow and not hold us accountable necessarily, but we need to be time-consistent. If there's any deviation in any of these variables, we need to be very clear why we're deviating, whether on the upside or the downside.

M.B: And just for my last question, Dr. Rania, I want to ask you two things, actually. The first is, how do you personally feel, the next year 2026, holds for us? And given that, what would you ask of the private sector right now?

R.M: I think that 2026 is going to be a very important inflection point or year for Egypt. When I take a look at the consistent performance over the past four quarters, it gives me a lot of faith that we're doing policies in the right direction. They're being reflected. And if we accelerate these reforms as we outline through the Doing Business [report], the Business Ready [report]… what's happening also on the social side with universal health insurance, with what we're seeing on social protection, with increasing the work on vocational schools—all of this together is going to push us in a direction which comes very much consistently with the political situation, which is improving.

Any turnaround that happens in the Suez Canal is going to be creating an extra push. What we're seeing with respect to the recovery in the oil and gas sector is also quite positive. Tourism next year is going to be another record. This year it is; next year hopefully it will be as well. So 2026, to me, is I would say a year of really dramatic change.

The other point, and I really urge all the private sector to take a look at the financing tools that are availed from different IFIs. These are tools which are there. They have been utilized by different companies. Sometimes they're the same companies because they know how to get there. We are doing more awareness across governorates so that more companies can actually benefit from this type of financing. Egypt is very unique in that sense, and whenever I talk to credit rating agencies, I tell them this should be credit positive, that this type of financing is not just for the government, it's there for the private sector, and the numbers have shown that.

What I ask the private sector is to take a look at really what's happening on the ground. When we're looking at the narrative, we always say that there's a public dialogue that is open for two months. So I consider this a public dialogue. I hope I get comments back. Also, whatever questions there are from this firechat or otherwise, I think it would be very useful to hear that. 

On the Business Ready report—and I'm sure my colleague, the Minister of Investment, will talk about it—it's also based on surveys with the private sector. So again, this continuous back-and-forth…

M.B: That two-way dialogue between the public and private sector.

R.M: Exactly 

And then the final thing is: bet on us. We're moving in the right direction. It needs a lot of work, but there's no complacency. We have a window of opportunity with what's happening globally, and that window of opportunity means that those countries that have a very strong narrative are matching it with reforms on the ground. Our numbers are showing improvement. We want to maintain that momentum and push forward.

M.B: That's an excellent closing statement. Bet on Egypt, everyone.

R.M: Bet on Egypt.

M.B: Dr. Rania Thank you. 

R.M: Thank you so much.