Egypt commits to boosting private sector role as it loses $7bn in Suez Canal revenue this year

PM Mostafa Madbouly met business leaders after IMF called for reforms to improve business environment and reduce state footprint

Egyptian Prime Minister Mostafa Madbouly announced a megaproject on Egypt's Mediterranean Coast in partnership with the private sector on July 1. Photo: Egypt's Cabinet

Egypt lost roughly $7 billion in revenues from the Suez Canal, down about 60 per cent annually, mainly as a result of attacks by Yemen's Houthis on ships in the Red Sea, Egyptian President Abdel Fattah El Sisi said on Thursday.

The amount marks a drop of more than 60 per cent annually, as attacks in Red Sea and Bab Al Mandab have impeded navigation and global trade, he said after a meeting with the Suez Canal Board.

Mr El Sisi's comments came as Egypt takes steps to boost its economy at a time of crises.

On Wednesday, Egyptian Prime Minister Mostafa Madbouly reaffirmed the government's commitment to make concerted efforts to increase the role of private sector in the country's economic growth.

In a televised meeting with business leaders in the new administrative capital, Mr Madbouly acknowledged that the Egyptian government “was forced” to take an outsize role in the economy in response to a series of crises, beginning with the 2011 Arab Spring uprising and continuing with Israel's war on Gaza.

“We, as the government, have full belief in the importance of the private sector's role and its role as the main driving force of the country's economic engine,” Mr Madbouly said, adding that the Egyptian private sector has historically played a “larger role in the economy with the majority of investments”.

“But in light of the extenuating circumstances that Egypt has been through since 2011, with all the chaos that brought led to the private sector's retreat due to fears that expanding into the economy, would lose them their investments. This forced the state to increase its investment in the economy,” he said.

The meeting came days after the International Monetary Fund (IMF) approved the country's fourth review at the staff level, which comes with a disbursal of $1.2 billion, pending board approval.

According to the Central Bank of Egypt, the US dollar reached its highest level against the Egyptian pound since March, climbing to EGP51. EPA

The IMF's report emphasised the need for Egypt to speed up reforms to improve the business environment, reduce the state's part in the economy, and increase private sector confidence to attract foreign investment.

Industry leaders present at the meeting outlined several challenges that continue to hinder their operations, including a shortage of available foreign currency for imports and natural gas disruptions caused by the war in Gaza. Egypt imports gas from Israel, and its supplies have been disrupted by the ongoing conflict.

Mr Madbouly defended the state's megaprojects, which have drawn criticism for their high costs without immediate returns to citizens. “This is why, despite all the challenges, we worked to develop infrastructure and implemented large-scale projects whose main purpose was to attract investments over the coming period. We hope these projects will bear fruit very soon,” he said.

He also addressed the State Ownership policy, under which the government agreed to sell its stakes in a number of national industries to foreign and local private sector companies as part of the deal with the IMF.

“We concede that the private sector is more proficient and experienced at management and operation,” Mr Madbouly said. “Today, we are committed to returning the private sector to its prior role as the dominant participant in the country's economy.”

Egypt has faced numerous challenges over the past five years, including the Covid-19 pandemic, the Russia-Ukraine war, regional instability and economic mismanagement by the government.

Over the past month, the Egyptian pound has experienced a significant depreciation against the US dollar and other major currencies.

According to the Central Bank of Egypt (CBE), the US dollar reached its highest level against the Egyptian pound since March, climbing to 51 Egyptian pounds.

The euro, Saudi riyal, UAE dirham, and Kuwaiti dinar also appreciated marginally against the Egyptian pound since the start of December.

The CBE last devalued the pound on March 6, after which the exchange rate was raised from a state-regulated exchange rate of 30 Egyptian pounds to 49 Egyptian pounds, which the government insists is the pound's real market value.

Mr Madbouly noted that since Egypt switched to a flexible exchange rate in March, the dollar's value has varied by 4 per cent to 5 per cent, and similar fluctuations are anticipated in the coming months, depending on the demand for the dollar.