Investing in Egypt: IMF backing, BRICS and reform attract investors

October 20, 2023

In 2022, Egypt doubled its 2021 Foreign Direct Investment (FDI) figure, bolstered by an International Monetary Fund (IMF) loan and a slew of regulatory reforms. The loan, awarded on December 17 2022 by the IMF, is a 46-month arrangement under the Extended Fund Facility worth $3 billion for the nation, conditional on the Government of Egypt (GoE) implementing a range of structural reforms. We spoke to Mohamed Mamdouh in the region to find out more about doing business in Egypt.

Egypt’s resilience as a top destination for Foreign Direct Investment (FDI)

Egypt attracted over $11 billion of inward investment in 2022, according to a 2023 report by UNCTAD (United Nations Conference on Trade and Development) in addition to the IMF funding agreement. The IMF’s backing aims to encourage Egypt in adopting a flexible exchange rate, implementing the State Ownership Policy to encourage privatisation, and lifting import restrictions imposed in the spring of 2022.

In line with this, Egypt has enacted several regulatory reforms like the Investment Law (Law 72 of 2017), a “New Company” law and a Bankruptcy law in 2018, and a new Customs Law in 2020, to optimise its business climate. In August 2023, Egypt also announced it was due to join trade coalition, BRICS, to help shore up the IMF investment and attract more FDI.

Sustainable development and climate readiness in Egypt: A growing priority

Additionally, Egypt’s engagement in global climate negotiations has been underscored by its hosting of the United Nations Climate Change Conference (COP 27) in November 2022, signalling a growing awareness of sustainable development.

Egypt’s economy is undergoing substantial transformations, thanks in part to a raft of governmental reforms targeted at foreign investments and broader economic development. This has led to increased demand for specialised auditing and accounting services, a need that Kreston Egypt is wellplaced to meet.

“Egypt has taken several initiatives over the last year, particularly focused on adapting to changes in the external environment,” remarks Mohamed Mamdouh, an expert in the Egyptian accounting and auditing sector. Among these initiatives are efforts to encourage foreign direct investment and bringing previously closed firms onto the stock exchange. “This has allowed auditing firms like Kreston Egypt to play a pivotal role in enhancing financial transparency and performance,” Mohamed observes.

Adapting to the changing tax landscape in Egypt: Implications for investors

In addition to these economic shifts, accounting regulations for domestic businesses have been revised, affecting areas such as currency exchange treatment and insurance firm standards. According to Mohamed, “Our local expertise, bolstered by the Kreston Global network, positions us to offer a full suite of auditing, accounting, and advisory services.” The firm specialises in a range of areas, including financial statement auditing, tax planning, transfer pricing and M&A due diligence, giving the team a broad understanding of the impact the reforms are having on clients.

Diversified investment opportunities in Egypt’s growing sectors

Changes to Egypt’s taxation laws aim to align with international norms, including The Organization for Economic Cooperation and Development (OECD) Base Erosion and Profit Sharing (BEPS) guidelines. “New regulations have emerged, covering a broader definition of Permanent Establishment, the use of e-invoicing, and a unified tax rate for gains,” Mohamed advises.

Beyond traditional financial matters, the regulatory environment in Egypt is also adapting to include ESG factors. “We are seeing a greater focus on ESG within the regulatory framework, states Mamdouh. Artificial Intelligence and blockchain are other key areas witnessing regulatory development. “The country is developing a stance on Artificial Intelligence, anticipating its role in enhancing business efficiency,” says Mamdouh. Regarding cryptocurrency and blockchain, he notes, “While the rules are still in development, there’s a clear interest in these technologies, indicating future regulatory action.”

Investment landscape

Opportunities for investing in Egypt are aligning with its new policy directions, offering potential in sectors like financial services, renewable energy, and technology. Kreston Egypt is ready to assist companies in navigating this evolving environment. “As the economy and regulatory landscape change, we are committed to guiding our clients through these complexities, contributing to their long-term success,” Mamdouh concludes.

Egypt is laying significant foundations to attract FDI, for businesses contemplating entry into the Egyptian market in 2024, the dynamic regulatory transformations underscore the importance of securing knowledgeable local expertise for effective navigation and compliance.

If you are planning on doing business or investing in Egypt, please get in touch.