- 1 Basic data
- 2 Public finances and the state budget
- 3 Banking system
- 4 Tax System
1st paragraph: Outlook and state of GDP, indebtedness, fiscal stability, shocks, possible overheating of the economy, capital, regional comparison, inflation and unemployment.
2nd paragraph: Brief description of the structure of the economy (what is its main added value, what it produces, what it imports, etc.)
Economic growth in recent years has been interrupted by the negative effects of the Covid-19 pandemic. The crisis occurred at a time when the Egyptian economy was poised to enter a phase of strong economic growth as a result of reforms adopted under the recently completed International Monetary Fund program. Thanks to the government’s fiscal measures, the economic situation soon recovered and GDP recorded a steady 3.3% growth in 2021. Check ebizdir for economical facts of Egypt.
The Russian-Ukrainian conflict caused a threat to the country’s food security, as Egypt is one of the largest importers of wheat in the region, up to 80% of which comes from Ukraine and Russia. The global crisis contributes to increased inflation. The Central Bank of Egypt issues protective measures, such as a strong devaluation of the Egyptian pound by up to 14% in March 2022 or a package of economic relief in the amount of 7.05 billion USD for the year 2022/2023. The moves point to Egypt’s efforts to secure further financial assistance from the International Monetary Fund if pressures on financial markets continue to mount. The growing trend of the Egyptian government to issue regulations that complicate the importation of foreign goods shows clear signs of non-tariff trade barriers.
Reducing the negative balance is one of the main priorities of the government. Nevertheless, the EU remains Egypt’s most important trading partner. The government further prioritizes large infrastructure projects financed by foreign investment, mainly from the Gulf states, in the areas of transport infrastructure and water management, and focuses on rural development, especially in the troubled Sinai region. Among the most famous megaprojects is the construction of the New Administrative City.
Table from MOP + additionally balance of payments, indebtedness/GDP.
|GDP growth (%)||5.6||3.6||3.3||5.3||5.7|
|Export of goods (billion USD)||28.5||25||36.1||43.8||46.4|
|Import of goods (billion USD)||66||52.9||78.5||89.9||90.7|
|Trade Balance (Billion USD)||-37.5||-37||-42.4||-46||-44.2|
|Industrial production (% change)||1.7||-10.1||9.4||4.7||6.2|
|OECD export risk||05.VII||05.VII||05.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-7.3|
|Public debt (% of GDP)||90.5|
|Current account balance (billion USD)||-17.2|
1st paragraph: Current status + outlook. (information mostly from EIU)
Paragraph 2: Balance of payments, foreign exchange reserves, description of data in the table in the public finance section (i.e. state budget deficit/GDP, public debt/GDP), foreign indebtedness, debt service
Foreign exchange reserves
After the revolutionary events of 2011, there was a sharp drop in foreign exchange reserves. During the rule of the Muslim Brotherhood, they decreased further, the government of President Sisi managed to significantly increase foreign exchange reserves again thanks to a reform program supported by an IMF loan of USD 12 billion. In particular, the devaluation of the Egyptian currency as a result of the exchange rate liberalization in November 2016 contributed to this.
The state budget has been in deficit for a long time. State deficits reached double-digit values in the past. The result is high government debt. In 2019, government debt fell to 84% of GDP, but the pandemic is driving it back to around 91% at the end of fiscal year 2021. The downward trend should resume from fiscal year 2022 at the earliest. The risk of government debt is a large share of short-term liabilities, i.e. high the need for refinancing of 30-40% of GDP per year. Debt financing costs are among the highest in the world – interest expenses amount to approximately 47% of budget revenues. The debt structure is friendly, only 26% is in foreign currencies and only 22% is held by non-residents. Most of the national debt is financed by the domestic banking sector.
How does the banking system fare, closedness/openness of the system, regulation, development of interest rates, the strongest top 5 banks (domestic + possibly foreign) + a comment on each of them, information on letters of credit, any specifics (e.g. Islamic banks)
All banks in the EAR are managed by the Central Bank of Egypt (CBE) with the exception of the following banks:
- Industrial Development Bank of Egypt
- Egyptian Arab Land Bank
- Bank for Development and Agricultural Credit
The Central Bank of Egypt controls and manages monetary, credit and overall banking policy through the usual methods – discount and interest rates, liquidity and reserves. The CBE policy is highly restrictive due to the large number of banks operating in the country. The restrictive measures adopted following the decline of foreign currency reserves during the post-revolutionary economic downturn, which consisted of limiting deposits, cash withdrawals and international transfers, were lifted after the Egyptian currency was freed in November 2016. Current information is provided on the websites of the Central Bank of Egypt.
Largest state banks:
- National Bank of Egypt (NBE)
- Banque Misr
- Bank of Cairo
In the past, Egypt’s central banking regulatory institution was not very interested in supporting the development of Islamic, i.e. basically interest-free and risk-free, banking in the country. As a result, the market share of these banks is not as significant as in some other Arab states. Islamic banks are regulated by the same banking law as conventional banks in the country (Law 88 of 2003). There are three exclusively Islamic banks and 3 branches of foreign (Gulf countries) banking institutions that offer Islamic banking services in Egypt. A number of other banks also offer Shariah-compliant banking services as an alternative. Interest in a license to operate Islamic banking in Egypt has recently been shown by some other banks from the Persian Gulf countries,
(if possible use Deloitte tax guides and highlights, available on the website https://dits.deloitte.com/#TaxGuides )
1 paragraph Clear/unclear, stable/unstable tax system.
2 paragraph Taxation of FO (total and who bears it), PO, VAT.
3 paragraph. Expected development.
The tax system of Egypt is regulated by tax laws. Their transparency is at a high level and their compliance is enforced. The Egyptian government aims to digitize the tax system and make it easier for companies and citizens to pay them.
The standard corporate income tax rate is 22.5%. Oil and gas exploration and production companies are taxed at a rate of 40.55%. Every individual living in Egypt is required to pay taxes on taxable income. This also applies to persons living abroad and having their sources of income in Egypt. The fiscal year for tax collection is from 1 January to 31 December.
Income tax amount:
- legal entities from commercial and manufacturing activities: 22.5%
- oil, gas and mineral extraction: 40.55%
- wages: 10% – 20%
– pensions – severance pay, subsistence payments or health insurance
– diplomatic corps and foreign experts living in Egypt, working for the state or private sector and having their income from abroad
– all agricultural enterprises in the cultivation of land – for a period of 10 years
– profit of agricultural organizations producing meat, poultry, fish – for 10 years
– income from shares and investments listed on the Egyptian Stock Exchange
– non-profit organizations and educational institutions
– from the profits of companies in free zones
Value added tax
Value added tax From 1 July 2017, VAT is 14%. A preferential VAT rate of 5% is applied to machinery for the production of goods and the provision of services, the export of goods and services is exempt from the tax. The VAT Act contains a list of items subject to tax exemption, containing 57 categories of goods and services. In addition, some Egyptian state authorities and entities are exempt from VAT.
Excise taxes are imposed on tobacco products, alcoholic beverages and coffee.