Egypt announced on Thursday it had a primary budget surplus for the first time in 15 years and said it was committed to paying oil companies' debts by end of 2019 as it seeks to lure investors to revive a crisis-hit economy.
Cairo has enacted a raft of tough austerity measures backed by the International Monetary Fund (IMF) since 2016, hoping for a strong financial comeback as it recovers from years of political upheaval.
President Abdel Fattah El Sisi's government devalued the Egyptian pound by half in 2016, and has pushed through steep fuel and electricity subsidy cuts this year, in measures praised by some economists but lamented by many Egyptians who say they are struggling with soaring living costs.
Finance Minister Mohamed Maait said Egypt achieved a 0.2 percent primary budget surplus, worth 4 million Egyptian pounds (Dh818.9m) in its 2017-2018 fiscal year. It is aiming for a 2 per cent primary surplus in the current fiscal year.
Egypt's fiscal year runs from July to June.
Primary budget figures do not factor in interest payments on government debt.
The country expected its 2017-2018 budget deficit to stand at 9.8 per cent, slightly above the 9.1 per cent it said last year it was targeting.
Mr Maait told reporters that revenues expected from the 2018-2019 budget were around 989 billion Egyptian pounds, 817bn pounds of which would be spent on debts and interest.
Foreign reserves rose by the end of June to $44.258bn from $44.139bn, the central bank announced separately, continuing their climb since Egypt secured the $12bn IMF loan.
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Egypt wants to woo foreign investors and increase other crucial sources of income such as tourism, which declined drastically in recent years because of political unrest and a precarious security situation, although tourism revenues have recently picked up.
A 2011 popular uprising which toppled ex-president Hosni Mubarak was followed by years of unrest, including the El Sisi-led ousting of president Mohamed Mursi in 2013, and attacks by Islamic State insurgents in the restive northern Sinai Peninsula against security forces and then civilians.
Mr El Sisi's supporters say the security situation has greatly improved during his presidency.
The discovery of large amounts of offshore gas in Egyptian waters, including the giant Zohr gasfield, has caused hope for another source of revenue with Egypt as a potential gas hub for the region.
Petroleum Minister Tarek El Molla said on Thursday Egypt was committed to paying off its debts to foreign oil companies by the end of 2019.
Those debts stood at $1.2bn at the end of June, their lowest since 2010 when they were around $1.3bn, he said.
Mr El Molla repeated that Egypt intended to increase production from the Zohr field to 2 billion cubic feet of gas per day by the end of this year - up from current levels of around 1.2 billion.
Discovered in 2015 by Italy's Eni, Zohr contains an estimated 30 trillion cubic feet of gas.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
