Egypt, sapped dry of dollars despite a US$3 billion IMF bailout loan, is seeking to boost its coffers by selling state assets to wealthy Gulf nations.
Experts say that the deals could be a win-win for all sides, but unlike old Gulf largesse of unconditional aid, the new deals would require reforms.
Cairo hopes the cash injection would plug what the IMF warns is “a financing gap of about [US]$17 billion over the next four years.”
Photo: Reuters
For Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE), 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. “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 Eqyptian President Abdel-Fattah al-Sisi make it an attractive investment.
However, al-Sisi’s Gulf allies — on whose support he relied after deposing former Egyptian president Mohamed Morsi in 2013 — are done writing blank checks, and now demand economic reform and greater transparency.
In under a year, the Egyptian pound has lost half of its value, propelling annual inflation in the import-dependent country to 26.5 percent last month.
Of the US$34.2 billion in Cairo’s foreign reserves — a 20 percent drop from February last year — about US$28 billion are deposits from wealthy Gulf allies.
The country’s foreign debt has more than tripled in a decade to US$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,” al-Sisi said at the World Government Summit in Dubai this week, noting the importance of “help from friends, the UAE, Saudi Arabia and Kuwait.”
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