Profit repatriation impedes acquisition deals in local market

A number of foreign airlines, such as Air France and KLM, have halted their flights to Egypt which raises the problem of repatriation of profits again.

The problem also explained the consequential reduction in the volume of direct foreign investment and the slowdown in acquisitions over local companies. Repatriating profits abroad unfolded in 2013 as a result of the erosion of the country’s foreign reserves due to declining tourism and foreign direct investment income.

Egypt has recently resolved part of the crisis. In October 2015 the government paid some $11.6bn as part of profits for the companies operating in research and exploration for gas and oil, which amounted to $14.3bn in total.

By the end of last year, the Central Bank of Egypt (CBE) also allocated $500m to repatriate delayed profits of foreign investors dealing in the Egyptian Exchange that have been standing since 2013.

Direct Investment Manager at the American Cartel Capital Ayman Abu Hend said the problem has been worsening under pressures faced by the pound-dollar exchange rate. The depreciation of the pound makes foreign companies fear the decline of their profits value when they are exchanged into dollars, which would change the profits margins on which parent companies assess the feasibility of foreign investment.

Future contracts in Europe and America set the price of the Egyptian pound at EGP 10.25 against the dollar for 2016, which threatens the value of investments.