The trading floor of Egypt’s bourse erupted into cheers when the government suspended plans to charge a capital-gains tax.

Conspicuously absent from the party, which sparked the biggest stock rally in almost two years on Monday, was Finance Minister Hany Kadry Dimian, who had vowed just last week that the tax would go ahead. The benchmark EGX 30 Index for equities rose 0.9 percent at the close in Cairo on Tuesday, taking its two-day surge to 7.5 percent. About 831 million Egyptian pounds ($109 million) of shares traded, the most in almost four months.

The U-turn highlights a policy challenge. The government is committed to collecting more revenue from a wider range of Egyptians, to trim one of the Middle East’s biggest budget gaps. Yet repeatedly, plans to raise some of the money through charges on wealthier Egyptians have been announced, praised by the International Monetary Fund -and then scrapped. The IMF had said the capital-gains tax was “well targeted and fair.”

“Postponing the tax is certainly positive for investors, but there is a credibility issue that now needs to be addressed,” said Hany Farahat, senior economist at Cairo-based investment bank CI Capital. “We hope the government now understands what needs to be ‘done and not done’ when it comes to communicating such decisions to the market.”

Income Tax

In March, officials canceled a 5 percent surcharge on the highest-earning Egyptians, just nine months after it went into effect. They also reversed an increase in the top rate of income tax introduced in 2013.

Egypt’s government came to power after an army takeover in 2013 and is struggling to revive an economy mired in its worst slump in two decades.

Egyptian newspapers said the decision to defer the capital-gains tax until 2017 was a victory for the exchange’s management. One day before the tax was dropped, the state-run Ahram Gate news website reported a “war of words between the bourse’s chairman and the finance minister.”

The move was announced by Prime Minister Ibrahim Mahlab at the exchange, where he rang the opening bell on Monday, accompanied by the Egyptian Exchange Chairman Mohamed Omran and Investment Minister Ashraf Salman -but not by Dimian.

The finance minister didn’t respond to calls and a text message seeking comment.

“The government yielded to the immense pressure from investors,” said Samer Atallah, a professor of economics at the American University in Cairo.

Mubarak’s Policy

“In terms of economic policy, this government is taking the same road that Mubarak took, which failed to deliver prosperity to the population,” he said, referring to former President Hosni Mubarak, who was ousted in a 2011 uprising.

Authorities say they plan to raise spending on education and health care to as much as 10 percent of gross domestic product in the next two years, in line with the country’s 2014 constitution.

“This hasn’t materialized yet, but the tax cuts did,” Atallah said.

Mahlab, the prime minister, told traders he wanted to “improve the bourse’s atmosphere,” while government spokesman Hosam El Qawish said the measure reflected a desire to preserve the competitiveness of Egypt’s financial markets. Most regional peers such as Saudi Arabia, which is due to open its market to foreigners next month, don’t tax capital gains.

Political Turmoil

Unlike the oil-rich Gulf states, Egypt is urgently seeking foreign cash. Four years of political turmoil have scared off investors and tourists and depleted currency reserves.

The budget has also come under strain. The IMF expects a deficit of about 12 percent of economic output this fiscal year. The capital-gains tax would only have recouped a fraction of that, economists say.

Billionaire Naguib Sawiris said the policy U-turn on taxing investors showed a government ready to learn from its mistakes. Sawiris was a vocal opponent of the charge, and penned a May 16 op-ed in Al Akhbar newspaper urging the government to “end the matter.”

“The decision is good because it reflects that the government actually listens to people of experience and to the public opinion, and goes back on its decisions when necessary,” Sawiris said in a phone interview.

Under Abdel-Fattah El-Sisi, the former army chief who led the takeover in 2013 and was elected president last year, Egypt has won plaudits from investors for economic measures like cutting energy subsidies. It’s also drawn condemnations over human rights after a violent crackdown on dissent, and political instability remains a risk.

Former Islamist President Mohamed Mursi, who was overthrown by El-Sisi, was sentenced to death on Saturday, raising concerns of increased violence. The ruling prompted his backers, the Muslim Brotherhood, to call for street protests and drew official condemnation from the U.S. and Germany.

Economic Recovery

Still, there are signs the economy may be picking up. It’s forecast to expand 3.7 percent this year, according to the median estimate of economists in a Bloomberg survey, the fastest pace since the 2011 revolt.

Omar Mohanna, chairman of Suez Cement Co., Egypt’s biggest publicly traded producer of the building material, said “the somewhat controversial policies are of a short-term nature” and that he remains “very bullish about the potential of the Egyptian economy.”

Sawiris said authorities should now push ahead with other steps sought by investors: attacking corruption, streamlining the bureaucracy and easing foreign-exchange restrictions. Also, “there needs to be more clarity, and they need to expedite the process,” he said.