Experts say deals could be a win-win for all sides, but unlike old Gulf largesse of unconditional aid, new deals will require reforms.
Cash-strapped Egypt sells state assets to Gulf nations. Egypt, sapped dry of dollars despite a $3 billion International Monetary Fund (IMF) bailout loan, is seeking to boost its coffers by selling state assets to wealthy Gulf nations.
Experts say the deals could be a win-win for all sides, but unlike old Gulf largesse of unconditional aid, the new deals will require reforms.
hopes the cash injection will plug what the IMF warns is “a financing gap of about $17 billion over the next four years”.
For Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, eager to diversify their oil and gas-based economies, it provides a swift route to snap up assets, land and stakes in state enterprises in the North African nation.
“The investments by Gulf states into Egypt last year helped to alleviate some of the immediate financing concerns that Egypt encountered, prior to securing further funds from the IMF,” said James Swanston, an emerging markets economist at Capital Economics in London.
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“At the same time, it has allowed the Gulf states to continue to have a sphere of influence in the region.”
For Gulf nations, a steep devaluation of Egypt’s currency and incentives offered by President Abdel Fattah al-Sisi make it an attractive investment.
But Sisi’s Gulf allies — on whose support he relied after deposing Islamist president Mohamed Morsi in 2013 — are done writing blank checks, and now demand economic reform and greater transparency.
Gulf spending spree
In under a year, the Egyptian pound has lost half of its value, propelling annual inflation in the import-dependent country to 26.5% in January.
Of the $34.2 billion in Cairo’s foreign reserves — a 20% drop from February 2022 — some $28 billion are deposits from wealthy Gulf allies.
The country’s foreign debt has more than tripled in a decade to $155 billion.
“A country like Egypt needs a trillion-dollar budget each year. Do we have that money? No. Do we have half of it? No. Do we have a quarter of it? No,” Sisi said at the World Government Summit in Dubai this week, noting the importance of “help from friends, the UAE, Saudi Arabia and Kuwait”.
But the days of unconditional aid are over, Saudi Finance Minister Mohammed al-Jaadan has warned.
“We used to give direct grants and deposits without strings attached, and we are changing that,” Jaadan said at Davos in January, explaining the kingdom will be demanding “to see reforms”.
As part of the IMF loan agreement, Cairo pledged to privatise key state assets, with a view to increase the private sector’s share of the economy from 30% to 65% by 2025.
Gulf nations swooped in.
In 2022, 66 mergers and acquisitions were completed in Egypt, more than double the transactions in 2021, Egyptian business news publication Enterprise calculated in December.
