In a "historic" move, the United Arab Emirates has pledged to invest $35 billion in Egypt, marking a significant breakthrough for Cairo in its efforts to address one of the most severe foreign exchange crises in decades.
The ambitious plans encompass the development of a prestigious area on Egypt's Mediterranean coast known as Ras El-Hekma, a project hailed by Egypt's Prime Minister, Mostafa Madbouly, as the largest deal in the country's history.
The Abu Dhabi wealth fund ADQ has pledged to acquire the development rights for Ras El-Hekma for $24 billion, with an additional $11 billion investment slated for various real estate and prime projects across Egypt.
"This deal will be the beginning of correcting the course of the Egyptian economy," Madbouly said, calling it "a message of confidence" from the UAE.
The investment will be sourced from the UAE's deposits in Egypt's central bank. ADQ will lead a consortium entrusted with the development of the Ras El-Hekma region, located northwest of Cairo, with ambitions to attract over $150 billion in investments for the initiatives.
Prime Minister Madbouly disclosed that Egypt is poised to receive $24 billion in fresh liquidity due to the agreement, with the UAE undertaking the conversion of their $11 billion deposits with the Egyptian central bank to support the developmental plans.
This landmark deal brings Egypt one step closer to finalizing a new agreement with the International Monetary Fund, as Madbouly stated during the event held in the new administrative capital east of Cairo.
The announcement of the UAE's investment in Egypt reverberated positively in the financial markets, with Egypt's foreign bonds experiencing a surge, emerging as the top-performing sovereign debt in emerging markets. The government's dollar-denominated notes maturing in 2051 saw a significant increase of 5 cents on the dollar.
The substantial influx of funds is expected to support Egypt in implementing a long-awaited currency devaluation, potentially the fourth since early 2022, with authorities poised to manage the adjustment effectively.
These funds are projected to aid in aligning the official exchange rate of the local currency with its black market value, contributing to stabilizing the Egyptian pound. Currently, the pound is traded at around 30.9 per dollar in local banks, while the black market rate is approximately 60.