Egypt struggling to draw investors despite regional uncertainties, pandemic

Egypt struggling to draw investors despite regional uncertainties, pandemic

CAIRO--The threat of conflict in Libya, water security worries and a flat-lining tourist sector risk upending a nascent rally in Egyptian bonds, bankers and economists say.

The North African country has attracted a wave of foreign investor interest in the past three months, emboldened by fresh financing from the International Monetary Fund (IMF), and short-term local debt offering yields of around 13%, among the highest in emerging markets.

Bankers and economists warn, however, that the yield bonanza masks an economy with weak prospects and heightened political risk, with the Cairo bourse falling on several days this month on fears of a Libya intervention. Parliament gave President Abdel-Fattah al-Sisi last week the green light for possible military intervention in Libya.

A deployment of armed forces into Libya could lead to higher military spending at a time when COVID-19 is already hitting the budget deficit.

"Obviously the IMF support package has reassured foreign investors and that is why there has been an improvement in flows, but the fundamentals are still weak,“ said Zeina Rizk, executive fixed income director at Arqaam Capital.

"The virus is raging, tourism is down, and government spending needed to boost the economy will add further leverage,“ she added.

Adding further uncertainty, Egypt has failed