Creating new perspectives since 2009

Gulf States play hardball over sending billions to rescue Egypt

February 25, 2023 at 9:45 am

Egyptian pounds [emi moriya/Flickr]

Bloomberg has reported that the Gulf States still refuse to send the majority of a financial support package pledged to Egypt amounting to $10 billion, pending Cairo’s implementation of its pledges in the economic file, and meeting the reform demands the Gulf countries deem necessary.

Bloomberg disclosed that Saudi Arabia, Qatar and the rest of the Gulf allies had earmarked more than $10 billion for Egypt, which was in dire need of foreign exchange, prompting it to sell shares in a group of state-owned companies.

However, only a small part of this financing has arrived, while informed sources said this was because Gulf officials are monitoring what the value of the local currency will reach after three devaluations over the past year.

It added that the Gulf States want to verify Egypt’s seriousness in implementing reforms it promised the International Monetary Fund (IMF) to secure a $3 billion loan.

READ: Cash-strapped Egypt prompts unprecedented Gulf acquisition of stakes in major state-companies

The agency believes that the Gulf States are not giving these investments as charity to Egypt but are investing because it has always seen Egypt as one of the main axes in the regional system and a vital centre for energy and trade routes.

The IMF stated last month that securing Gulf funding is critical for Egypt to bridge a funding gap of about $17 billion in the next few years.

When Egypt called for urgent help last year, Qatar, Saudi Arabia and the United Arab Emirates (UAE) deposited $13 billion in the Central Bank of Egyptian, but the Egyptian government has stated that the country needs foreign direct investment rather than aid.

Hence, the proposal was made to sell shares in 32 state-owned companies, including three banks (Arab African International Bank, Banque du Caire and United Bank of Egypt) in 2023.

Last year, Egypt began talks to attract $2.5 billion in stake investments in several state-owned companies, including Vodafone Egypt, the country’s largest mobile operator.

The sources indicated that talks with the Qatar Investment Authority are ongoing. Two sources said the size of the deal could vary as the valuation of assets changes after the most recent devaluation in January.

READ: Saudi-Egypt talks stall over sale of United Bank

Last year, the Saudi Public Investment Fund bought state-owned stakes in four Egyptian companies listed on the stock exchange for $1.3 billion.

The Abu Dhabi Investment Authority approved a $2 billion deal that included the purchase of a stake of about 18 per cent of the shares of Commercial International Bank, the largest bank listed on the stock exchange.

Bloomberg concluded its report by saying: “Gulf powers, who provided cash deposits and oil during previous crises, now seem determined to see tangible returns on investment in the country. That could deepen their involvement in Egypt’s private sector, which has long complained it faces unfair competition from state enterprises, particularly those belonging to the military, deterring large-scale foreign investment.”