Egypt inks $35bn deal with UAE to develop beach strip
Egypt says it has signed a deal with the United Arab Emirates (UAE) to develop a prime stretch of Mediterranean coast that will bring $35bn of investments to the indebted country over the next two months.
Egyptian Prime Minister Mostafa Madbouly said on Friday the deal with ADQ, the smallest of Abu Dhabi’s three main sovereign investment funds, was for the development of the Ras al-Hekma peninsula and could eventually attract up to $150bn in investments.
Such inflows would provide a huge boost to Egypt’s crisisstricken economy as it faces new pressures linked to the war in Gaza and seeks an expansion of its IMF support programme.
The country has long struggled to attract large-scale foreign investment outside the hydrocarbons sector. In the financial year to end-June 2023, net foreign direct investment stood at $10bn.
Egypt’s sovereign dollar bonds soared on Friday. Longer-dated bonds enjoyed the biggest gains, with those maturing in 2031 or beyond up more than 4c in the dollar to trade at 65.5c-73.4c — for most their highest level in about a year, Tradeweb data showed.
“If the financing comes through as planned, we believe this (along with an upsized IMF programme) should provide ample liquidity to cover Egypt’s financing gap over the next four years,” Farouk Soussa of Goldman Sachs said in a note.
Ras al-Hekma lies about 200km west of Alexandria in an area of upscale tourist resorts and white sand beaches popular with wealthy Egyptians during the summer months.
ADQ said work to build the “next generation city” over 170km² — nearly a fifth of the size of Abu Dhabi city — would begin in early 2025. It would feature investment zones, technology and light industry, amusement parks, a marina, an airport and tourism and residential developments.
Egypt’s government will keep a 35% stake in the project.
Madbouly said the deal would bring in $15bn in the next week and $35bn over two months — though he said $11bn of that money would be converted into Egyptian pounds from UAE dollar deposits in Egypt’s central bank.
ADQ did not include any time frame for investments.
Egypt has been mired in a slow-burning economic crisis that includes a chronic shortfall of foreign currency, which has led to sustained pressure on the Egyptian pound, on state spending and on local businesses.
Inflation accelerated to record levels last summer, the debt burden has been rising, and the shortage of foreign currency could deepen because of lost revenues from the Suez Canal after attacks on shipping in the Red Sea by Yemen’s Houthi movement.
A $3bn financial support package from the IMF signed in December 2022 faltered after Egypt paused on a pledge to move to a flexible exchange rate regime and progress on stateowned asset sales proved slow.
Talks with Egypt to boost its IMF loan programme were making excellent progress, the IMF said on Thursday. It said Egypt needed a “very comprehensive support package” to deal with economic challenges, including pressures from the war in Gaza.
Since President Abdel Fattah al-Sisi came to power, Egypt — the Arab world’s most populous country — has received tens of billions of dollars in bailouts by wealthy Gulf states that backed his toppling of the Islamist Muslim Brotherhood in 2013.
But this avenue has largely dried up in the past two years as Gulf nations have chosen to link support to free-market reforms and seek profitable investments in Egypt’s most prized assets.
ADQ insists its mandate is purely commercial, according to people close to the company, but is chaired by Sheikh Tahnoon bin Zayed al-Nahyan, who as well as being a prominent business person is UAE national security adviser and is seen as a foreign policy troubleshooter for his brother, the president.
The deal showed that Egypt was “too big to fail”, said Viktor Szabo, portfolio manager at abrdn in London. “This is a good development and will help with growth for sure, but Egypt will see the benefits more over the medium term,” he said.
In an economic survey of Egypt published on Friday, the Organisation for Economic Cooperation and Development said limits on new projects should be extended, tax collection improved and barriers to the private sector reduced, among other reforms.
IF THE FINANCING COMES THROUGH, IT SHOULD PROVIDE AMPLE LIQUIDITY TO COVER EGYPT’S FINANCING GAP