FinMin wants to cut reliance on hot money: Egypt needs to focus less on attracting portfolio flows and more on foreign direct investment and export growth, Finance Minister Mohamed Maait said on the sidelines of the Qatar Economic Forum this week, according to Bloomberg.

“The majority” of portfolio flows have left the country, Maait told Bloomberg TV earlier this week (watch, runtime: 10:02). “Now it’s the time for Egypt to concentrate more on the increase of exports and foreign direct investments rather than the carry trade.” Egypt has suffered three waves of outflows in the past four years, during the emerging-market crisis in 2018, the pandemic shock in 2020, and this year following Russia’s invasion of Ukraine, Maait said. “We have gotten used to [handling] with it.”

Maait isn’t the only minister to have flagged this in recent weeks: Planning Minister Hala El Said said last month that the government would look to prioritize FDI over hot money, which she said had put pressure on the exchange rate.

FDI is the new priority ⁠— and things are looking up after Gulf states pledged more than USD 22 bn in fresh investment and central bank deposits in a bid to support our economy through the global rough patch. We expect more where that came from as the government pushes ahead with plans to attract USD 40 bn in private investment by selling off state-owned assets over the next four years and increase exports to USD 100 bn a year within five years. This all comes after a disappointing 2021 for FDI, when inflows fell 12% despite much of the world rebounding from the covid shock the year before.

Fresh IMF assistance will likely come in the form of a new extended fund facility: Maait said talks with the IMF on a fresh loan program are now focused on a four-year extended fund facility (EFF). That’s the same kind of support the IMF gave us back in 2016 under a USD 12 bn, three-year program.

But don’t rule out other forms of support: Also still on the table is another SBA, or a policy coordination agreement (PCI), Maait said.

Background: We’ve been in talks with the Fund for several months on a new assistance program to help us mitigate the fiscal strain and balance of payments pressure caused by spillover effects from the war in Ukraine. PM Moustafa Madbouly said last month he hopes Egypt finalizes the program with the IMF “within two months”. CBE governor Tarek Amer has said we will only receive “limited” funding this time around due to already exceeding our quota.

ALSO FROM THE QATAR ECONOMIC FORUM-

Maait moves on a double taxation treaty with Qatar: Maait and his Qatari counterpart Ali bin Ahmed Al Kuwari signed an MoU agreeing to work on a treaty to prevent double taxation between their two countries, according to a Finance Ministry statement. Doha has pledged bns of USD along with the KSA and the UAE to help us overcome the repercussions of the global crisis triggered by the war in Ukraine, as last decade’s rift between Qatar and some of its neighbors in the region fades into memory. Trade and Industry Minister Nevine Gamea just this week invited Qatari companies to visit Egypt to discuss potential investments after reviving a joint business council suspended since 2014.