UAE $35bn investment drives Egypt economic recovery and key reforms
One of the top accounting firms in the world, PricewaterhouseCoopers (PwC), has noted Egypt's economic revival and underlined the vital part the UAE government is doing in this regard.
Based mostly on a $35 billion UAE investment, PwC underlined in its most recent "Middle East Economy Watch" report the good advancements in Egypt 's economy. Important reforms including the deregulation of Egypt's currency, which has helped to lower inflation and open international financial support, have been sparked by this investment, Egypt's resurgence signifies a change toward a better economic future even if problems still exist.
Apart from strengthening Egypt's economy, the UAE's financial support has opened more money from foreign agencies as the European Union (EU), World Bank, and International Monetary Fund (IMF). This flood of support has raised investor confidence, hence lowering government debt rates and drawing additional foreign investment.
PwC mentioned among their most important expenditures the UAE's $35 billion pledge to construct the northern seaside city of Ras El Hekma in Egypt, The biggest foreign investment in Egypt came in February when a group headed by Abu Dhabi Development Holding Company (ADQ) obtained rights to develop the area for $24 billion, Egypt's central bank received further $11 billion to assist different infrastructure and development initiatives. The government of Egypt keeps a 35% share in this advancement.
Officially revealing the Ras El Hekma development plan, UAE President Sheikh Mohamed bin Zayed Al Nahaney visited Egypt recently, This audacious vision calls for 750,000 new employment, $110 billion in investments by 2025, and homes for up to two million people, The initiative is supposed to change Egypt's northern coast and act as a main engine of economic development.
Egypt still struggles greatly economically notwithstanding these encouraging advances, Large budget deficits and ongoing current account imbalances have long caused the nation to rely on outside financing, Between 2015 and 2023 Egypt's external debt has doubled, severely stranding its foreign exchange reserves, The war in Ukraine aggravated the situation in 2022 by driving skyrocketing prices of commodities and a significant increase in the cost of imported gasoline and wheat. Investors so withdrew around $20 billion from the nation, so severely taxing its resources.
Egypt responded by signing in December 2022 an Extended Fund Facility arrangement with the IMF. Under this deal, the government promised major economic changes including the sale of state assets to generate capital and draw foreign currencies. Although development has advanced, the government has only sold a small portion of the thirty-two properties scheduled for privatization. Among the biggest acquisitions were UAE investments including Eastern Tobacco by Global Investment Holding and ADQ's $800 million purchase of shares in three industrial enterprises.
The $35 billion UAE investment on Egypt's foreign reserves, national budgets, and general investor confidence has had transforming effects, according PwC's research. Alone, the development of Ras El Hekma is expected to draw up to $150 billion in future investments including building a new airport, guest resorts, and other infrastructure projects. For Egypt as well as ADQ, these projects are expected to create major job possibilities and income.
The impetus created by the UAE's investments also helped Egypt to liberalize its currency in March, which resulted in a more than a third devaluation of the Egyptian pound. Unlike past devalues, the central bank stayed out of intervening to set a new peg to the dollar, which the IMF found favorably. The IMF thus changed Egypt's funding plan from $3 billion to $8 billion, and the EU and World Bank promised respectively $8 billion and $6 billion.
Although these steps have given some relief, PwC cautioned Egypt still has major long-term problems. Still urgent problems are disruptions to trade across the Suez Canal, persistent poverty, and significant degrees of underemployment. Furthermore even although Egypt's main budget surplus has increased, national finances are still under pressure from debt servicing costs.
Egypt's economic recovery has been mostly driven by the UAE's large investment, which has unlocked international backing and created the path for long-term development, To overcome its continuous difficulties and attain consistent economic stability, Egypt will thus need constant reform initiatives as well as international cooperation.