Egypt: Market-friendly reforms, one step further

​Reforming and rebalancing

Egypt implemented significant reforms in November 2016. These are aimed at switching from a rigid model with a fixed exchange rate, high subsidies, and capital controls to a more market-based one. 

The trigger for this change was low liquidity and the need for financing from the International Monetary Fund. As the Egyptian government accepted the IMF’S conditions, the country made a quick comeback to financial markets. 

Still, short-term costs are heavy, resulting in high inflation (+30% in 2017). Yet this price shock is helping to rebalance the economy by making imports costlier. This ongoing rebalancing is a pre-condition to making the most of the country’s business environment, which is one of the most favourable in the region.