The United Arab Emirates (UAE) and Egypt have agreed on the construction of a new city on the Mediterranean coast of the North African country, with the Abu Dhabi wealth fund ADQ stating that it will lead a consortium planning to invest 35 billion dollars.
Egyptian Prime Minister Mostafa Madbouly described the development plan for Ras El-Hekma, an area around 350 kilometers northwest of Cairo, as the largest project in the history of his country. ADQ said it expects to attract over 150 billion dollars in investments for the project.
Speaking on Friday, Madbouly said Egypt will receive 24 billion dollars in new liquidity as a result of the agreement.
The UAE will also convert its 11 billion dollars in deposits in the Egyptian central bank to finance ventures, he said.
Egypt’s foreign bonds rose after the news, with government dollar bills due in 2051 jumping 4.5 cents per dollar, a record leap.
The financing is a boost to Cairo’s efforts to tackle its worst currency crisis in decades and could help it implement a long-awaited currency devaluation, the fourth in Egypt since the beginning of 2022.
Although the International Monetary Fund (IMF) has been calling for this step for months, authorities likely waited for a significant influx of foreign currency that would allow them to manage the adjustment without the risk of overshooting.
Egypt is expected to receive 35% of the profits from the Ras El-Hekma project, and the UAE has also agreed to joint investment in an international airport in the area as part of the project.
The project will include a financial and business district to attract international companies, as well as schools, hospitals, universities, and a marina for yachts and cruise ships, the prime minister said. Egypt expects to attract an additional 8 million tourists after the completion of the city, he said.
“This agreement marks the beginning of correcting the course of the Egyptian economy,” Madbouly said, also calling it a “message of trust” from the UAE.
Egypt could receive more funds. It is also nearing an agreement with the IMF on a deal that could bring in other partners and increase its current aid package of 3 billion dollars, of which only a small portion has been disbursed, to over 10 billion dollars.
The IMF postponed two reviews of Egypt’s existing program while waiting for the country to fulfill promises that included adopting a truly flexible exchange rate.
The pact will, of course, deepen ties between Egypt and the UAE. This energy-rich Gulf country is a key supporter of President Abdel-Fattah El-Sisi.
“The size of the investment is far greater than what we expected,” said Farouk Soussa, an economist at Goldman Sachs Group Inc.
The latest wave of financing from the UAE began in 2022 with a 5 billion dollar deposit in the Egyptian central bank, and ADQ paid around 2 billion dollars in deals that included the purchase of about 18% of the largest listed lender in the African country, Commercial International Bank.
Last year, ADQ spent 800 million dollars on minority stakes in Egyptian Ethylene and Derivatives Co., the oil company of Egyptian Drilling Co., and Egyptian Linear Alkyl Benzene, a petrochemical producer.
The UAE company acquired a 30% stake in Egypt’s largest tobacco company for 625 million dollars, while Egypt and the Gulf country signed a local currency swap agreement worth about 1.4 billion dollars in September, Jutarnji.hr writes.
