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UAE invests $35bn to develop Ras Al Hekma City in Egypt


Egypt
 and the United Arab Emirates (UAE) recently entered into a significant real estate investment agreement. In this deal, the Abu Dhabi Developmental Holding Company (ADQ) has been granted the rights to develop the Ras Al Hekma project, with a substantial investment of $24 billion. The primary objective of this initiative is to transform the area into a vibrant and prosperous destination. Additionally, an extra $11 billion in deposits will be allocated for investments in strategic projects across Egypt, further bolstering the country’s economic growth and overall well-being. 

Egypt

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 Egypt’s 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 to $150 billion in investments during its development phase. This influx of capital is expected to generate “millions” 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, “The 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 Egypt’s diverse economy.”

Impact on Egypt’s 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 country’s 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 “very few steps away” from reaching a new agreement with the International Monetary Fund (IMF).

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Goldman Sachs anticipates that this deal will offer “sufficient liquidity” (alongside the large IMF program) to bridge Egypt’s 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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