Egypt’s Fiscal Reckoning has not been Resolved, only Rescheduled

On February 23rd Egypt and the United Arab Emirates (UAE) signed a $35bn deal to develop Ras el-Hekma, a wedge of land jutting off Egypt’s Mediterranean coast. The biggest urban land sale in Egypt’s history saw the Emiratis buy the rights to 171m square metres of land, with plans to build homes, hotels and shopping centres in a sort of Dubai on the Med. Egypt will retain a 35% stake in the project. Within weeks of the announcement, the IMF more than doubled the $3bn loan it promised Egypt in December 2022, to $8bn. The European Union (EU) announced a $8bn aid package, and the World Bank stumped up another $6bn. All told, Egypt hauled in more than $50bn, a sum that dwarfs the central bank’s $35bn in foreign reserves. The mega-deal has, for now, pulled it back from the brink. Egypt needs to grow its economy and fix its chronic current-account deficit. But its private sector is anaemic and sky-high interest rates will be a drag on growth. Property sales to local buyers will not bring in dollars. The state will be on the hook to build water, power and transport infrastructure for the new city—which will require big foreign-currency outlays. 
 

THE ECONOMIST