Riyadh March 7 2024: In barely 10 days, Egypt has gone from the brink of economic disaster to unlocking more than $40 billion of investments and loans from the United Arab Emirates and International Monetary Fund, with the likelihood of more to come from Saudi Arabia and others.
On Wednesday, as part of that, it delivered its biggest-ever interest-rate hike and allowed its currency to weaken more than 38% in a long-awaited flotation.
The moves were the culmination of global efforts —led by oil-rich Gulf states and the IMF, and backed by the US — to stabilize a country whose stability is seen as crucial for the Middle East and which has been hammered by soaring inflation and a war on its border.
Foreign investors are already hailing the turnaround and saying they expect Egypt to attract billions of dollars from bond traders in the coming months.
The next step for the country, home to 105 million people, may be a multi-billion dollar land investment from Saudi Arabia.
Egyptian and Saudi authorities are in preliminary talks over the development rights for a northern Red Sea coast area known as Ras Gamila, people familiar with the matter said, asking not to be identified because negotiations aren’t public. Saudi authorities did not respond to requests for comment.
If a deal’s agreed, it would see the kingdom follow neighboring UAE, which announced a $35 billion investment — the biggest in Egypt’s history. Most of that will be to develop a peninsula on the Mediterranean coast called Ras El-Hekma.
“Egypt reached a breaking point and the size of Ras El-Hekma deal showed the depth of the crisis,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “Neither the UAE nor other Gulf countries want to see another Arab Spring or political turmoil in Egypt.”
Egypt’s latest bout of economic tumult began in 2022, when Russia’s invasion of Ukraine sent commodity prices surging and pushed up the cost of imported wheat and fuel. Bond investors fled en masse, pulling about $20 billion from the country.
Israel’s war with Hamas in Gaza exacerbated the pressures. Some tourists stayed away from Egypt’s beaches and ancient sites, while shipping attacks by Houthi militants in the Red Sea caused traffic through the Suez Canal — a critical source of income for Egypt — to dive.
Egypt has, along with the US and Qatar, been a key mediator in cease-fire talks. It’s tried to get more aid into the enclave, though it’s resisted calls to take in hundreds of thousands of Palestinian civilians from Gaza. It says that would undermine their cause for an independent state and pose a security threat if Hamas fighters came with them.
