Saudi Arabia pledged to invest $5 billion in Egypt, a vote of confidence in Cairo’s efforts to address its fiscal and investment policies as well as a signal of shifting Gulf attitudes towards plowing cash into flailing regional economies.
Saudi Crown Prince Mohammed bin Salman struck the deal during a meeting with Egypt’s prime minister in Riyadh. The announcement from Egypt’s government was short on details, but one target for Saudi Arabia could be real estate development on Egypt’s Red Sea coast.
The Gulf has grown weary of handing cash to Egypt with little by way of financial payback: Saudi Arabia’s $5 billion deposit in Egypt’s central bank in 2022 may be the last of Riyadh’s handouts. Its Public Investment Fund demands market returns on its investments, particularly those outside the country.
In that way it is following in the footsteps of the UAE whose own sovereign wealth fund ADQ in 2022 became the biggest shareholder in two of Egypt’s top three listed companies, including the country’s main cigarette-producer. In February of this year, it committed a hefty $35 billion for a prime stretch of beach on the Mediterranean.
These investments have encouraged Cairo to open up its economy, serving to make it more investible: Following the February deal, Egypt devalued its currency and adopted a free float, paving the way for the International Monetary Fund to more than double its own rescue package to $8 billion.
Egypt’s incentives are clear: Its economy has been strained by the war in Gaza and by plunging Suez Canal toll revenues as global shipping companies avoid the Red Sea over attacks by Yemen’s Houthis on transport vessels. Many of its domestic military-run companies are also badly mismanaged. Gulf investments help curtail that freefall, and tend to be less intrusive than cash injections from the West.
IMF conditions — such as those related to tax exemptions for public, particularly military-owned, firms — have not all been met, said Timothy Kaldas, deputy director for The Tahrir Institute for Middle East Policy, in an interview. “Egypt prefers to have multiple funders,” Kaldas said. “Gulf state requirements for transparency tend to be less demanding.”
Gulf countries — mainly Saudi Arabia, the UAE, and Qatar — are most interested in building up stakes in Egypt’s state-owned assets. On the block are port terminals, historic hotel chains, and petrochemical companies.
These deals have downsides, though: Egyptians have complained — in some cases, even rioted — over fake news that Qatar was buying the pyramids. In the realm of reality, the UAE’s stake in Egypt’s top cigarette maker, for example, may complicate Cairo’s effort to curb smoking in an infamously tobacco-addicted population: With the UAE invested, there will be considerable pressure to maintain profits.