Strategy& and Lazard advise Egypt on economic reform

26 August 2014 2 min. read

The government of Egypt has recently hired strategy consulting firm Strategy& and investment bank Lazard to draw up plans to reshape its economy. According to the preliminary findings of the external advisors, Egypt will need a total investment of at least $60 billion to reach its target – an average GDP growth of 5% by 2018.

The Egyptian economy has over the past years stagnated. Between 2004 to 2011 the country booked GDP growth rates per capita of 1% to 5%, yet as a result of the political instability the growth rates have turned negative for three years in a row now. In addition, foreign direct investment (FDI) into Egypt has received a massive blow: prior to the 2011 revolt FDI was roughly $8 billion, in the most recent fiscal year the Middle-Eastern country drew in just $3 billion.

To bring the economy back on track the government has launched a drastic economic reform agenda, including topics such as public spending cuts, the renegotiation of long-term loans and rebuilding the confidence of external investors in the Egyptian economy. To support the setup of the reform agenda, the country’s leaders have brought in the expertise of U.S. consultancy Strategy& and international investment bank Lazard. The consultants have been given three main tasks. Firstly, they are overseeing the setup of the reform agenda, ensuring that appropriate economic models are applied and that plans are aligned to both best practices and the views of key (international) stakeholders.

Secondly, Strategy& and Lazard are drawing up plans how Egypt can bring the capital influx into the country back to the pre-crisis levels. According to the preliminary findings of the external advisors, Egypt will need at least $60 billion of investment to reach an average GDP growth of 5% by 2018. In addition, it should count on another $60 billion to bolster its foreign reserves, say the consultants. Based on the outlook, Egypt will in the second half of the year approach several large donors and investors, among others the IMF and the UAE, to convince them to pump money into the economy. Towards the end of the year a large donor conference is planned, and although not confirmed, it is expected that Strategy& and Lazard will play a part in the preparation process.

The third main task encompasses drafting recommendations for the reform of a number of key industries. Government officials have confirmed that restructuring plans have already been outlined for the state-run media and textile sectors, and it is in the line of expectations that over the course of the coming months other sectors will follow.