Egypt’s announcement last week that it is set to receive $5bn in funding from Saudi Arabia’s Public Investment Fund (PIF) to “boost bilateral relations” was light on detail, raising questions around the nature of the investment and what the Kingdom hopes to gain in return. But it does mark a new phase in  Saudi-Egypt relations.

Saudi Arabia said last year it would no longer provide financial support to its allies without conditions attached. It has not invested in Egypt since 2022, despite Cairo’s repeated pleas for assistance from Gulf partners to address its economic crisis. 

The announcement was made even as the wider region becomes increasingly unstable, compounding Egypt’s precarious economic position: Egypt remains a key-player in Gaza-Israel peace negotiations and has been greatly affected by the crisis in the Suez Canal.

While it is unclear what the terms of the $5bn package will be, when the money will be invested and how Egypt will use the proceeds, the PIF seeks market returns from all external investments and is likely to pursue a strategic investment in Egypt. 

“Saudi has invested in Egypt to guarantee the stabilisation of the North African country,” Giuseppe Dentice, head of the Middle East and North Africa (MENA) desk at the Italy-based Centre for International Studies, tells The Africa Report. “And also to extend its influence in Egypt.”

Saudi’s strategy in Egypt

“Saudi Arabia has long viewed Egypt as a prime investment destination,” says Hossam Abougabal, a MENA analyst at geopolitical firm Dragonfly.

“This is from a business perspective, given Egypt’s large population and spending power. But also for geo-strategic reasons because of the Egyptian military’s role in repressing political Islamist [Sunni] movements across the region, namely the Muslim Brotherhood,” he says. 

For Saudi Arabia, [South Sinai and the Red Sea] are fundamental areas for its strategic approach in terms of foreign policy, security policy and diversification policy

As Dentice says, Saudi Arabia has historically funded development projects in Egypt and may do the same this time around. “The interest of Saudi Arabia is to support Egypt in its socio-economic problems in order to help its development.”

As Riyadh ramps up the development of the $500bn-mega-city NEOM, which borders the Red Sea, it could also look to invest in the Red Sea region in Egypt. Saudi acquired Red Sea islands Tiran and Sanafir from Egypt in a controversial sale in 2016. 

“For Saudi Arabia, [South Sinai and the Red Sea] are fundamental areas for its strategic approach in terms of foreign policy, security policy and diversification policy,” says Dentice.

Geopolitical impacts

Saudi’s investment into Egypt follows in the footsteps of the United Arab Emirates $35bn-buyout of Egypt’s North Coast resort Ras el Hekma in March. The two Gulf nations are often rivals as their economic competition escalates across Africa, but so far, there is little to suggest Saudi is competing with UAE in Egypt, Abougabal explains.

“There is plenty of investment needed to go around both,” says Abougabal. “It is the investment environment in Egypt that is most likely to, if at all, deter some UAE investments there.”

For Dentice, a motivating factor behind Saudi’s investment is its economic rivalry with the UAE. “In this peculiar moment of history in the Middle East, the two countries are competing all across the Middle East, Asia and Africa,” he says.

Egypt’s blossoming relationship with Turkiye, which has had poor relations with the UAE since the 2011 Arab Spring, could be another potential factor behind the new Saudi investment, as Saudi potentially seeks to oust the UAE as Egypt’s main financial backer. But this seems unlikely at this stage, according to Abougabal.

“We doubt that Egypt’s recent rapprochement with Ankara will affect its relationship with Gulf countries,” Abougabal says. “In fact, having Turkiye onside is probably viewed by Egypt and Saudi Arabia as another way to curb the influence of political Islamism.”