CAIRO: Egypt’s finance minister said on Monday that the government can no longer depend on foreign purchases of treasury bills to fund its budget, but should instead focus on boosting foreign direct investment (FDI).
“The lesson we’ve learned (is) you can’t depend on this type of investment. It just comes in to get high returns, and once there’s a shock it leaves the country,” said Maait told the American Chamber of Commerce.
“In four years, I worked (on) three shocks of this hot money,” Maait said.
Some $15 billion left the country during the 2018 emerging markets crisis and nearly $20 billion remained during the COVID-19 outbreak in 2020, he said.
Egypt faced a similar crisis this year when Russia invaded Ukraine and the United States began raising interest rates. This triggered an estimated $20 billion outflow of portfolio investment.
“We have to depend on FDI,” Maait said. “We have to depend on improving our investment environment. We have to depend on increasing private sector participation.”
Egypt has long had some of the highest real interest rates in the world, but rates have held steady over the past week. Maait said a spike in inflation to 13.5% had turned real rates negative.
Higher global interest rates, a weak currency and investor wariness of emerging markets suggest Egypt will struggle to fund a projected $30 billion budget deficit for the fiscal year beginning May 1. July.
“We have a plan. One, we are in talks with many investors in the Gulf and others, and we have assets. The second is concessional borrowing, perhaps from international banks, European banks, the Bank of the African Development Bank,” said Maait. .
Although a sharp decline in the number of Ukrainian and Russian visitors dealt a blow to Egypt, Maait said tourism was picking up and gas exports were more profitable. Egypt will also look to non-traditional financing such as repeating the samurai bonds it sold to Japan in March, he said.
“I can go back. Now I’m talking with the Chinese to issue a panda (bond). It’s very cheap.”
(Reporting by Patrick Werr; Editing by Aidan Lewis and Richard Pullin)