Gulf Countries to invest in Egypt Sovereign Fund
Saudi Arabia, the United Arab Emirates and Kuwait are considering investing in a multibillion-dollar “sovereign fund” to finance projects in Egypt, according to a senior government official in Cairo.
Al-Youm al-Sabei, an Egyptian newspaper, reported on Wednesday that the Gulf countries would invest $10bn in the fund ahead of a high-profile international investment conference in Sharm el-Sheikh next month.
The official, who would not confirm the sums involved, said the “sovereign fund . . . would invest in renewable energy, infrastructure projects and job creation schemes” in Egypt. He added: “It will also fund projects in health and education. There is a lot of attention to the social dimension of the economic reform process”.
Egypt’s government, led by President Abdel Fattah al-Sisi, have expressed hopes that the conference will stimulate a revival in foreign investment in the country. Its economy was deeply damaged by the prolonged turmoil that followed the 2011 revolution, which scared away investors and tourists, increased poverty and unemployment and led to a stalling of growth. Dozens of projects, worth billions of dollars, will be presented to investors at the conference, ministers say.
Gulf countries rushed to stave off an economic crisis in Egypt after Mr Sisi ousted his elected Islamist predecessor in a popularly backed coup in 2013. Analysts said the Gulf region’s conservative monarchies viewed the displaced Muslim Brotherhood government as a threat and that they now had a stake in the success of Mr Sisi’s regime.
Those countries have already extended billions of dollars in support to Egypt in the shape of central bank deposits, free petroleum products and loans on easy terms. Hany Kadry Dimian, finance minister, told the Financial Times last month that Cairo had received $16.6bn in support from its Gulf allies in the fiscal year to June 2014. The UAE is supplying $8.7bn in energy products on easy terms in the current fiscal year.
The potential injection of billions of dollars into its economy would help shore up the value of the Egyptian pound, which has been allowed to slide by the central bank in recent weeks in an effort to protect foreign currency reserves and send a positive signal to investors deterred by what they consider an overvalued currency.
Egypt’s foreign currency reserves were $15.3bn at the end of December, the last month for which figures are available. They stood at $36bn on the eve of the 2011 revolution. The Egyptian pound weakened to 7.53 to the US dollar in Wednesday’s central bank currency auction. The rate had been fixed at 7.15 for six months until January 18 when the central bank opted to allow it to slide.
Source: The Financial Times
