Dollar-strapped Egypt resorts to selling state assets to Gulf nations

Egypt is running out of dollars and is attempting to bolster its finances by selling state assets to rich Gulf countries, showed a media report.That despite a $3 billion rescue loan from the International Monetary Fund (IMF). Calling the latest funding attempt a win-win for all parties, experts claim the new deal will call for long-term structural improvements rather than the unconditional rescue deals from the past.

IMF had warned that Egypt would face a financing gap of around $17 billion over the next four years, and Cairo expects the plan to sell state assets will help reduce the deficit. The deal offers a quick way for countries like Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates to acquire properties, land, and holdings in state companies in Egypt.

With those countries seeking to diversify beyond their oil and gas-based economies, Cairo's offer is lucrative, especially as the Egyptian pound has taken a beating. A weaker currency makes investment cheaper for a foreign entity.

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The war on the edge of Europe, the Russia-Ukraine crisis, pushed global investors to shelter into safe-haven dollar-denominated assets and hurt almost every other currency on the other side of the exchange rate. The Egyptian pound was no exception to the surging dollar bets.

Egypt has become an appealing investment destination for Gulf countries due to a sharp devaluation of its currency and lucrative offers provided by President Abdel Fattah al-Sisi. The North African country has traditionally been an import-dependent economy, and the steep fall in its currency, almost half the value lost against the dollar in less than a year, has cut the country's foreign exchange coffer by 20 per cent since February last year.

Over 80 per cent of the country's forex reserves of $34.2 billion are comprised of deposits from wealthy Gulf affiliates. The nation's foreign debt has more than tripled to $155 billion in the last ten years.

According to a media report, President Abdel Fattah al-Sisi at the World Government Summit in Dubai said, "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." Sisi acknowledged the "support from friends, the UAE, Saudi Arabia, and Kuwait."

But this time, Gulf nations have warned that Cairo cannot get the aid without conditions anymore, and there needs to be more transparency and long-term structural reforms.

Indeed, Saudi Arabia's finance minister Mohammed al-Jaadan has cautioned the days of restriction-free assistance are finished.

"We used to give direct grants and deposits without strings attached, and we are changing that," Jaadan said at Davos in January, explaining the kingdom will be demanding "to see reforms".

The IMF, too, had laid down stringent conditions, including Egypt opening up its economy and increasing the private sector's share to 65 per cent from the current 30 per cent by 2025.

Egypt, for its part, has tried to establish the new order. According to calculations by the Egyptian business weekly outlet Enterprise, 66 mergers and acquisitions were finalised in Egypt in 2022, more than double the number of deals executed in 2021. The majority of those were military deals. Emirati and Saudi firms had most of the stakes in 40 military deals.

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