The United Arab Emirates (UAE) will inject $35 billion in foreign direct investment into Egypt over the next two months, Egyptian Prime Minister Mostafa Madbouly announced on Friday.
The investment is expected to help Egypt address its hard currency crunch, which has threatened its ability to service its large foreign debt. It will also allow the country to unify its official and black market exchange rates for the Egyptian pound.
Emirati sovereign wealth fund ADQ said that $24 billion of the investment would go to developing the Ras al-Hikma area west of Alexandria on the Mediterranean coast. The remaining $11 billion would be used for investment in other projects across Egypt to support its economic growth and development.
The deal signed between the two governments foresees the injection of a first tranche of $15 billion over the next week, with a second tranche of $20 billion following within the next two months.
Egypt’s economy has been hit hard by a series of recent shocks, including the pandemic, the Ukraine war, and attacks by Yemen’s Huthi rebels on Red Sea shipping. These events have caused a decline in tourism revenue, increased import costs, and reduced Suez Canal fees.
The International Monetary Fund (IMF) has provided Egypt with a $3 billion loan facility, but has demanded painful austerity measures in return. The IMF says that loan tranches and programme reviews will be delayed until Egypt implements promised reforms, including a fully flexible exchange rate.
The currency crunch has eroded confidence among Western investors about Egypt’s ability to service its debts. JP Morgan recently announced that it would exclude Egypt from its index of government bonds, while ratings agency Moody’s lowered its outlook on Egyptian bonds from “stable” to “negative”.
