The Egyptian Prime Minister Dr. Mostafa Madbouly announced on Friday the signing of a major agreement with the United Arab Emirates. Under this agreement, the Gulf state will invest around $35 billion in the Egyptian economy. The agreement includes a $24 billion investment in the new city project on the Ras al-Hekma peninsula, which lies on the coast of the Mediterranean Sea, about 350 km northwest of Cairo and about 200 km west of the Egyptian port city of Alexandria.
According to the Egyptian Prime Minister, this mega project is part of Egypt's long-term housing preparation and will be a “new generation” city. It will include residential buildings, free economic zones, commercial areas, tourist attractions and associated infrastructure, including a new airport.
Ras al-Hekma is a mega project covering an area of around 170 million square meters. The Egyptian government assures that it will retain 35% of the shares even after the agreement, contradicting rumors of asset sales due to economic distress. The Egyptian government expects to attract a total of $150 billion in foreign investment through this project.
Additionally, Egypt will receive an additional $11 billion as the United Arab Emirates announced that a previous deposit with the Central Bank of Egypt will essentially be converted into an investment.
The agreement is described by Egyptian regime-controlled media as “historic” and has the potential to significantly transform Egypt’s economic development. However, some commentators, particularly those outside Egypt who are less sensitive to the regime, raise questions about the actual injection of money into the Egyptian economy and its timing. There are also concerns about Egypt's logistical capacity to carry out such a project and the use of the $11 billion released by the Emirates.
The mega-deal with the Emirates is seen as a lifeline for Egypt's economy, which is grappling with challenges exacerbated by the impact of the war in Gaza and declining revenues from the Suez Canal due to Houthi attacks in the Red Sea. This has led to a severe shortage of foreign currency, with the black market exchange rate rising to around 70 Egyptian pounds to the dollar before news of the Emirati investment brought it down to around 55 pounds.
With inflation running at around 30% per year and external debt reaching around $165 billion, Egypt's ability to allocate budgets for development and job creation is limited. Egypt's hope now rests on additional investment from Gulf states and other countries to support the economic recovery, as well as a new agreement with the IMF for a loan worth an estimated $3 billion to $6 billion.
While Egypt offers promising investment opportunities, it is difficult to separate the Emirates' lifeline from the regional geopolitical landscape. The Emirates appear to recognize Egypt's potential role in Gaza's post-conflict economic and political reconstruction, strengthening its influence over the Egyptian economy while positioning itself for future Gaza reconstruction projects.
Comments are closed.