Egypt said it has signed an agreement with the United Arab Emirates to develop a key sector on its Mediterranean coast that would bring $35 billion worth of investments to the debt-stricken country over the next two months.
Egyptian Prime Minister Mustafa Madbouli said in a press conference that the partnership with ‘The Hold’ (ADQ), the smallest of the three major sovereign investment funds in Abu Dhabi, aims to develop Ras Al-Hakama Peninsula and may eventually attract investments of up to $150 billion.
Such flows would provide a tremendous boost to the Egyptian crisis-stricken economy as it faces new war-related stresses in Gaza and seeks to expand the International Monetary Fund’s current support program.
The country has long struggled to attract large-scale foreign investment outside of the oil and gas sector. In the financial year ending June 2023 net foreign direct investment reached $10 billion.
Egypt’s sovereign bonds rose by the dollar on Friday before the announcement and continued to rise until the afternoon.
TredWeb data showed longer-term bonds enjoyed the biggest gains, with bonds rising more than four cents on the dollar in 2031 or after to be traded at 65.5-73.4 cents, their highest level in about a year.
“If funding goes as planned, we believe that this (together with an expanded International Monetary Fund programme) will provide enough fluid to cover the funding gap in Egypt over the next four years,” Farouk Sousa of Goldman Sachs said in a note.
Ras Al-Hakada is located about 200 kilometers west of Alexandria in an area with high-end tourist resorts and white sandy beaches worn by wealthy Egyptians during the summer months.
Work to build a 170-square-kilometer “next-generation city” — nearly five the size of Abu Dhabi — will begin in early 2025, Edek said. The city will feature investment zones, technology, light industries, recreational parks and anchors. And airport as well as tourist and residential projects.
The Egyptian government will retain 35% share in the project.
Madbouli said the deal would bring $15 billion next week and $35 billion over two months, although he said that $11 billion of that money would be transferred to Egyptian pounds from current Emirates dollar deposits in Egypt’s Central Bank.
ADEK did not include any time frame for investments in its statement.
Egypt suffers a slow-flaming economic crisis involving a chronic shortage of foreign currencies that has led to ongoing pressures on the Egyptian pound, government spending, and local companies.
Inflation has accelerated to record levels last summer, debt burdens are rising, and the foreign currency shortage may worsen due to loss of revenue from the Suez Canal following attacks by the Yemeni Houthi movement on shipping in the Red Sea.
A $3 billion financial support package from the International Monetary Fund, signed in December 2022, has stumbled after Egypt stopped its pledge to move to a flexible exchange-rate regime and slow progress in sales of government assets proved.
The IMF said on Thursday that talks with Egypt to boost the IMF loan program are progressing excellently. She said Egypt needs a “very comprehensive support package” to address economic challenges, including the pressures caused by the war in Gaza.
‘too big to fail’
Since President Abdel Fattah Al-Sisi came to power, Egypt – the largest country in the Arab world by population – has received tens of billions of dollars in rescue operations from the rich Gulf countries that supported the overthrow of the Islamic Brotherhood in 2013.
But this road has dried up significantly in the past two years, as Gulf countries have chosen to link support to free market reforms and look for lucrative investments in some of Egypt’s most valuable assets.
Adeek insists that its mandate is purely commercial, according to people close to the company, but is headed by Sheikh Tahnoun bin Zayed Al Nahyan, who, besides being a prominent businessman, is the National Security Adviser of the United Arab Emirates and is seen as an an analyst of the United Arab Emirate’s foreign policy errors and the brother of the President.
The announcement of the Ras Al-Hikada deal showed Egypt was “too big to fail,” said Victor Zabo, Aberdeen’s portfolio manager in London.
“This is a good development and will definitely help growth, but Egypt will see bigger benefits in the medium term,” he said.
The economic crisis has increased pressure on the Egyptian leadership to scrape the massive infrastructure projects that were the hallmark of Sisi’s rule, reducing the dominance of the state and the army over the economy.
However, Sisi continued to insist that massive projects generate investment and jobs.
In an economic survey for Egypt published on Friday, the OECD said restrictions on new projects, improve tax collection and reduce barriers to the private sector, among other structural reforms.
ShortNews1
Rizeq Alshbool
