UAE invests $35bn to develop Ras Al Hekma City in Egypt
Egyptย and theย United Arab Emirates (UAE)ย recently entered into a significant real estate investment agreement. In this deal, theย Abu Dhabi Developmental Holding Company (ADQ)ย has been granted the rights to develop theย Ras Al Hekmaย project, with a substantial investment ofย $24 billion. The primary objective of this initiative is toย transform the area into a vibrant and prosperous destination. Additionally, anย extra $11 billionย in deposits will be allocated for investments inย strategic projectsย across Egypt, further bolstering the countryโs economic growth and overall well-being.ย
Ras Al Hekma Development
Ras Al Hekma, situated approximately 350 kilometers northwest of Cairo, is a coastal area. This strategic investment aims to transform Ras Al Hekma into a premier Mediterranean vacation destination, a bustling financial hub, and a free zone with robust infrastructure. These efforts are geared toward boosting Egyptโs economic and tourism growth potential. Notably, the Egyptian government will maintain a 35% stake in the Ras Al Hekma development project.
Investment Details
During the press conference where the agreement was announced, Egyptian Prime Minister Mostafa Madbouly disclosed that the $35 billion in foreign direct investment would be allocated as follows: $24 billion in cash liquidity and $11 billion from UAE deposits at the Central Bank of Egypt. These UAE deposits will be converted into Egyptian pounds and utilized for development initiatives.
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The ambitious project is anticipated to draw up toย $150 billionย in investments during its development phase. This influx of capital is expected to generate โmillionsโ of jobs and infuse liquidity into the Egyptian economy.
Statements from Key Figures
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Mohamed Hassan Al Suwaidi, Managing Director and CEO of ADQ, stated, โThe investment in Ras Al Hekma aligns with our commitment to transforming the area into one of the most prominent coastal destinations. This will be achieved by enabling key development and infrastructure projects. We are collaborating with partners such as Modon Developments and the Talaat Moustafa Group to create opportunities across multiple sectors in Egyptโs diverse economy.โ
Impact on Egyptโs Economy
Egypt grapples with a challenging economic crisis, intensified by geopolitical tensions in the region. Additionally, a scarcity of foreign currency results from dwindling remittances from expatriates and declining export rates. These incoming funds are anticipated to play a crucial role in mitigating the countryโs dollar crisis.
Positive Market Reaction
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Following the deal announcement, Egyptian foreign bonds experienced a surge, emerging as the top-performing sovereign debt in emerging markets on Friday. Specifically, government dollar bonds maturing in 2051 witnessed an impressive leap of 4.5 cents on the dollar, marking a record increase, as reported by Bloomberg data.
IMF Deal and Future Outlook
During the press conference, Madbouly emphasized that the agreement brings Egypt โvery few steps awayโ from reaching a new agreement with the International Monetary Fund (IMF).
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Goldman Sachs anticipates that this deal will offer โsufficient liquidityโ (alongside the large IMF program) to bridge Egyptโs financing gap over the next four years. The expected foreign currency inflow will provide the Central Bank of Egypt with the necessary resources to address accumulated foreign currency requests and stabilize the parallel market in the upcoming days or weeks.
Furthermore, Goldman Sachs views this agreement as a supportive factor for the Egyptian pound, presenting an opportunity for Egypt to restore liquidity in the foreign exchange market in the near future.
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