meed-logo

line1 line2 line3
SIGN IN / REGISTER

More pain for more gain for Egypt

7 February 2024

This package on Egypt also includes:

> UK and Egypt sign infrastructure agreement
> Familiar realities threaten Egypt’s energy hub ambitions
> Egypt nears fresh loan agreement with IMF
> ADQ and Adnec invest in Egypt hospitality group
> Egypt’s President El Sisi secures third term
> Egypt 2024 country profile and databank 

 

Egyptian President Abdel Fattah El Sisi might have hoped for a honeymoon period after his resounding election win in December, but has enjoyed not a bit of it.

Egypt started 2024 with an economic crisis gaining in intensity, with events in the Red Sea – sharply reducing traffic through the Suez Canal – compounding other challenges, including a foreign currency (FX) shortage, a depreciating pound on the parallel market and rising inflation.

The president’s words on 24 January were ominous: “Egyptians need to live with economic pain,” he said, indicating that 2024 would be a tough year.

With Egypt’s economic crisis worsening by the week, the siren calls for a support package from the Washington-based IMF have grown ever louder. Expectations are high that a new and larger extended fund facility (EFF) is imminent, with IMF officials visiting Cairo in January to hammer out a deal.

Analysts have suggested the EFF – initially set at $3.9bn – could now be as high as $10bn-$12bn. This increase reflects the desperate situation that Egypt is in.

It is also a sign that Egypt still has a few cards left up its sleeve – not least amid the current crisis in the Middle East that has left it playing a vital role, however ineffectually, as the main conduit for aid deliveries into Gaza.

The Red Sea crisis and the desire to keep a dependable security partner in the region afloat are also factors.

“There is a bit more political willingness to support Egypt than a year ago,” says James Swanston, Middle East and North Africa economist at Capital Economics.

Economic precipice

The immediate backdrop to the renewed EFF negotiations is the sharp deterioration in the value of the pound after a bad 2023 that saw the official rate depreciate by 25% against the dollar.

By the end of January, the pound was trading at £E68-£E70 to the dollar, more than double the official rate of nearly £E30.9 to the dollar. Although the announcement of an imminent deal with the IMF in early February led the pound to rally to £E55 to the dollar on 4 February.

The fiscal headwinds are nevertheless increasingly fierce in 2024. With about 60% of its revenues absorbed by interest payments, according to ratings agency Moody’s, the government has very limited fiscal headroom to respond to such shocks. Cairo’s dilemma is that even if the EFF is raised to the upper limit of $12bn, it will only partially cover its financing needs.

Meanwhile, ratings agencies have been busy downgrading the sovereign. Fitch Ratings cut Egypt’s long-term foreign currency rating to B- from B, with a stable outlook, in November, reflecting its perception of heightened risks to Egypt’s external financing, macroeconomic stability and the trajectory of already-high government debt.

The slow progress on reforms, including the delay in the transition to a more flexible exchange rate regime, has damaged the credibility of exchange rate policy and exacerbated external financing constraints at a time of increasing external government debt repayments, said Fitch.

External financing stresses influenced the downgrading of Egypt, says Paul Gamble, director of the sovereign group at Fitch Ratings.

“There are FX challenges becoming apparent and also concerns over the availability of foreign currency. There are significant black-market transactions and FX shortages, signalling that downward pressures on the currency have increased, and the path to policy adjustment has become more complicated, at a time of high external debt repayments.”

One particular challenge facing Egypt is that Egyptian expatriate remission inflows from the Gulf states have declined, with many getting a better deal on the parallel market than through official channels.

Then there are the Suez Canal revenues, which government officials say fell by 44% in January compared to the same month in 2023.

“The revenue collections from the Suez Canal are a very stable source of income for Egypt, so the fact that they have been hit is a bit of a concern,” says Gamble.

“The impact on investor sentiment and the parallel market rates could further complicate the transition to a more flexible exchange rate. On the other hand, the IMF is talking about upsizing its assistance programme, and Egypt is getting more bilateral attention.”

Next steps forward

Assuming the EFF is finalised, attention will then switch to what comes next.

The strings attached to that package will be substantial, incurring both political and economic costs.

Fiscal policy will see more stringency, with sharp cutbacks on spending. Major projects may lose some support. Yet, while these projects are important for job prospects in Egypt, the IMF’s message is to keep fiscal policy tight for now. 

More stringency on the privatisation drive is also on the menu. Under the country’s divestment programme for state-owned enterprises (SOEs), speculators suggest that up to 150 SOEs may be sold off. However, political sensitivities over the military’s footprint in many of these assets mean delays are possible.

The most important thing in the near term is dealing with the pound, which was in virtual free fall at the end of January, forcing banks to install limits on FX transactions.

According to Capital Economics, if a staff-level agreement is announced, the central bank would move swiftly to devalue the pound by an initial 23%, to £E40 to the dollar, before allowing it to freely float.

“We feel [a rate of £E40-£E43 to the dollar] is a natural level, and it should not result in a fresh inflationary spike, but rather, inflation will fall at a slower rate,” says Swanston.

It was suggested that this could coincide with a sharp hike in interest rates of at least 300 basis points (bps), to 22.25%, and indeed, on 1 February, the central bank went ahead with this, raising the deposit rate to 21.25% and the lending rate to 22.25%.

That said, higher-for-longer prices and a 300bps interest hike will be painful for businesses to absorb, while a weaker pound will also make imports more expensive. 

Yet, for all the doom and gloom, there are some green shoots. Egypt’s GDP growth is stable, with Capital Economics forecasting GDP growth of 3.5% in 2024-25.  

Tourism – a valuable source of hard currency – is another recent bright spot, with arrivals to Egypt rising 9% in year-on-year terms during the first 19 days of 2024.

Egypt’s tourism numbers, spiking at approximately eight times higher than the global tourism rate of 4.5%, have been pivotal in stimulating overall growth, says property consultancy JLL. Between January and October 2023, Egypt registered about 13.9 million tourist arrivals, almost 36% higher compared to the same period last year.

“This is the medicine [the country] needs to take to lay the foundations for unlocking the economy’s potential in coming years,” says Swanston.

“They have a couple of years of slow economic growth, but if you have got an orthodox policymaking framework with a flexible exchange rate, and you bring the debt ratio down, you can start going about actually taking advantage of very good demographics of a young population.” 

There will be much pain in the interim. But the consensus is that staying the course will lead to better days.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11493190/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Adnoc steps up crude expansion

    15 October 2026

     

    Abu Dhabi National Oil Company (Adnoc Group) is entering a new phase of upstream investment as the UAE’s withdrawal from Opec opens the way for greater oil production flexibility. After spending an estimated $37bn on upstream projects in 2023 and 2024, the state-owned energy company continues to invest heavily in expanding crude production capacity and developing domestic gas supplies.

    The investment programme supports two key targets: raising crude production capacity to 5 million barrels a day (b/d) by 2027 and achieving gas self-sufficiency by the end of the decade.

    Following the UAE’s withdrawal from Opec in May 2026, Adnoc Group has nearly matched its 2024 upstream project spending level so far this year and is on course to surpass it by a significant margin.

    The UAE had invested billions of dollars in expanding crude production capacity, but output quotas under the Opec+ framework had constrained its ability to translate that capacity into higher production and additional oil revenues in a high-price environment.

    The UAE’s exit from Opec gives Adnoc greater flexibility to utilise its spare capacity, accelerate progress towards its 5 million b/d target and potentially exceed it. The company is positioning itself to capitalise on rising oil demand while retaining the flexibility to respond to market conditions.

    Robust offshore spending

    So far this year, Adnoc Offshore has awarded major contracts for projects involving the Satah Al-Razboot (Sarb) deep gas development, the expansion of the Nasr oil field and an increase in the Upper Zakum oil field’s output capacity to 1.5 million b/d.

    Adnoc reached a final investment decision (FID) on the Sarb project in January and awarded the main engineering, procurement and construction (EPC) contract to US-based McDermott International. The contract is estimated to be worth around $500m, sources told MEED.

    The project is expected to deliver 200 million cubic feet a day (cf/d) of gas by the end of the decade – enough to power more than 300,000 homes.

    The scope includes the EPC of an offshore wellhead tower with four gas production wells, which will be connected to Das Island for processing through Adnoc Gas facilities. The works also include the installation of pipelines and intra-field connections linking the Sarb field to Das Island.

    Also in January, Adnoc Offshore awarded McDermott a $942m contract for the Nasr-115 project, which will increase production capacity at the Nasr offshore field to 115,000 b/d. The field is located about 130 kilometres northwest of Abu Dhabi.

    McDermott’s scope covers engineering, procurement, construction and installation services for two topside structures, a new manifold tower, a jacket, a bridge, associated pipelines, subsea cables and brownfield modifications.

    UZ1.5MMBD project

    Located 84km offshore Abu Dhabi, Upper Zakum is the world’s second-largest offshore oil field and fourth-largest oil field overall. The UZ 1.5MMBD project is Adnoc Offshore’s latest crude production expansion scheme at the Upper Zakum field.

    The project scope is divided into three packages. The first EPC package covers surface facilities required on the field’s existing artificial islands, including integrated gas-lift compressors, produced-water reinjection units, water treatment plants, pre-assembled manifolds and related facilities.

    The second package covers offshore facilities and comprises several segments of subsea pipelines and subsea cables.

    The third package covers work on Adnoc’s existing Zirku Island and will require additional oil tanks, a water treatment unit, an export gas compressor, a condensate treatment unit, and associated power and utilities facilities.

    Adnoc Offshore awarded the first and third EPC packages of the UZ 1.5MMBD project to Spanish contractor Tecnicas Reunidas, while Abu Dhabi-based NMDC Energy won the second package. The overall scheme is estimated to be worth more than $10bn.

    Umm Shaif Gas Cap

    Gas production has also been a key capex area this year, with Adnoc and its foreign partners reaching a $6.2bn FID in July for a major project to produce up to 600 million cubic feet a day (cf/d) of natural gas by developing the Umm Shaif Gas Cap in Abu Dhabi.

    The Umm Shaif Gas Cap reserve lies within the offshore Umm Shaif and Nasr hydrocarbons concession, in which Adnoc is the majority stakeholder. Other stakeholders in the concession are Italy’s Eni, France’s TotalEnergies and China National Petroleum Corporation.

    Adnoc said the FID includes three EPC packages totalling $5.1bn for large-scale offshore infrastructure, awarded to the following contractors:

    • First offshore package – fabrication of a 30,000-tonne gas compression system: Larsen & Toubro Energy Hydrocarbon (India) / Lamprell (Saudi Arabia/UAE)
    • Second offshore package – fabrication of another 30,000-tonne gas compression system: McDermott (US)
    • Onshore package – EPC of gas inlet and processing systems on Das Island: China Petroleum Engineering & Construction Company (CPECC)

    As part of the FID, Adnoc also awarded a $365m contract to its subsidiary Adnoc Drilling for a 14-well drilling and integrated drilling services scope, to be delivered over 18 months using three existing rigs.

    Separate from the Umm Shaif Gas Cap development, Adnoc Offshore is preparing to issue the main tender for the next expansion phase of the Umm Shaif oil and gas field offshore Abu Dhabi.

    Contractors expressed interest to Adnoc Offshore in June in participating in the main tendering exercise for the Umm Shaif long-term development plan 2.1 (LTDP-2.1) project.

    The project’s primary objective is to maintain Umm Shaif’s oil production capacity at approximately 390,000 b/d, while enabling peak output of up to 430,000 b/d.

    The project includes constructing a new combined artificial island at Umm Shaif, equipped with drilling, processing, utilities and supporting infrastructure. It also includes installation of an optimised crude-stabilisation train at Adnoc’s existing Das Island facilities.

    Located about 150km northwest of Abu Dhabi city, Umm Shaif is one of Adnoc’s oldest offshore oil-producing assets. In 2022, the company marked the 60th anniversary of the UAE’s first export of Umm Shaif crude, which took place in July 1962.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20634497/main.gif
    Indrajit Sen
  • Joint venture wins Oman desalination contract

    15 October 2026

    Bahwan Veolia Water, a joint venture of France’s Veolia and Oman’s Bahwan Engineering Company, has signed a five-year operations and maintenance (O&M) contract for the Al-Asilah desalination plant in the sultanate.

    The Al-Asilah plant has a production capacity of 80,000 cubic metres a day and helps supply drinking water to about 600,000 residents across South Al-Sharqiyah governorate. It also has an on-site solar farm to support lower-carbon water production.

    The plant entered commercial operation in January 2022 under a build-own-operate arrangement. A consortium of Bahwan Engineering and Japan-headquartered JGC Corporation developed it.

    South Korea’s Doosan Heavy Industries & Construction, now known as Doosan Enerbility, carried out the engineering, procurement and construction (EPC) works.

    Oman’s first independent water project (IWP), the Sur IWP, also serves residents in Al-Sharqiyah governorate.

    The main contract for the project was awarded in 2007, with Veolia carrying out EPC works and acting as shareholder in Sharqiyah Desalination Company, which owns the plant.

    Bahwan Veolia Water signed a 22-year O&M agreement for the project that same year.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20631273/main.jpg
    Mark Dowdall
  • Adnoc funnels billions into boosting gas processing

    15 October 2026

     

    Abu Dhabi National Oil Company (Adnoc Group) is accelerating investment in gas processing and associated downstream infrastructure as demand in the UAE rises and the government prioritises lower-carbon energy growth.

    Rising gas consumption in the UAE is being driven by rapid population growth, greater household electrification, expanding industrial bases and demand from gas-intensive downstream segments such as petrochemicals, fertilisers and metals.

    Power generation and water desalination are also key sources of demand, while new industrial zones – as well as data centres supporting the expansion of artificial intelligence (AI) use in the country – add further baseload requirements.

    Adnoc Gas, Adnoc Group’s gas processing subsidiary, is leading the UAE’s push to expand gas processing capacity and is executing a major capital expenditure (capex) programme worth $28bn over 2026-30.

    As part of that capex plan, Adnoc Gas achieved a final investment decision (FID) on the second and third phases of its Rich Gas Development (RGD) programme earlier this year.

    Adnoc Gas awarded $8.2bn of engineering, procurement and construction (EPC) contracts for the second and third phases of the RGD programme. These cover a new gas processing train at the Habshan complex and a natural gas liquids fractionation train at the Ruwais gas processing facility, respectively.

    Under the awards, China-based Wison Engineering will execute phase 2 under a $3.9bn contract, while Italy’s Tecnimont has secured the $4.3bn phase 3 contract.

    Adnoc Gas has also reiterated its $5bn capex for the first phase of the RGD scheme, which is under construction. The company awarded $5bn of engineering, procurement and construction management contracts in three tranches for phase 1 of the RGD programme in June last year, marking the company’s largest-ever capital investment.

    Across all three phases, Adnoc Gas has committed a total of $13.2bn to the RGD programme.

    Bab Gas Cap development

    Looking ahead, Adnoc Gas is advancing towards FID on the estimated $8bn Bab gas cap development. The project will process up to 1.85 billion cubic feet a day (cf/d) of raw feed gas once Adnoc Group begins extracting reserves from four underdeveloped onshore reservoirs at the Bab field: Thammama A, B and H (projected to yield a combined 1.45 billion cf/d) and Thammama F (projected at 396 million cf/d).

    Because existing trains at the Habshan complex cannot accommodate these supplementary volumes, the project entails building a processing plant approximately 170 kilometres from Abu Dhabi city, alongside pipeline networks and ancillary units.

    Adnoc Gas has split the EPC scope into four packages, with technical bids due on 16 November:

    • Package 1: Main Bab gas cap processing plant
    • Package 2: Early civil works
    • Package 3: Pipeline network
    • Package 4: Non-process facilities and associated infrastructure

    Four contractor consortiums prequalified to bid for the main contracts:

    • Larsen & Toubro Energy Hydrocarbon (India) / Samsung E&A (South Korea)
    • Saipem (Italy) / NMDC Energy (UAE)
    • Technip Energies (France) / JGC Corporation (Japan) / Sinopec (China)
    • Tecnimont (Italy) / China Petroleum Engineering & Construction Corporation 

    Gas pipeline investments

    Adnoc Group continues to invest in projects to enhance its gas transmission networks across the UAE, following its $3.5bn-plus capex on the Estidama programme earlier this decade to expand its sales-gas network in the country.

    Adnoc Gas recently awarded the main contract for a project to build a new pipeline that will supply gas from the Habshan scraper launcher station at its Habshan gas compression complex in Abu Dhabi to the Al-Nouf customer receiving station, for delivery to Emirates Water & Electricity Company (Ewec).

    The proposed 56-inch, 127km pipeline will help the UAE’s state utility, Ewec, meet additional gas demand to power the second phase of an AI data centre in Abu Dhabi, as well as support the relocation of some of its key assets in the Mirfa area of the emirate.

    Adnoc Gas awarded the EPC contract for the project to India-based Kalpataru Projects International.

    Separately, Adnoc is moving ahead with plans to build an oil pipeline network that will transport crude from its main offshore oil processing islands in the Gulf to its onshore crude export terminal at Jebel Dhanna, Abu Dhabi.

    The planned network will source crude from Zirku Island and Das Island, where Adnoc gathers and treats oil produced at Abu Dhabi’s offshore fields, among other processing hubs, and transport it about 300km inland to the Jebel Dhanna terminal.

    The proposed pipelines will eventually connect to the West-East crude pipeline network currently being built from Jebel Dhanna to the emirate of Fujairah, which is expected to be commissioned in 2027.

    Boosting chemicals output

    Meanwhile, following major investments over the past three years to set up specialty chemical plants under the first phase of its chemical derivatives complex in Ruwais Industrial City, Taziz is firming up plans for the second phase of the complex.

    Taziz has partnered with local conglomerate Alpha Dhabi to undertake a joint feasibility and market study and, subject to FIDs and regulatory approvals, the second phase of the Taziz Industrial Chemicals Zone could produce up to 14 new chemicals, with total output capacity of about 2.2 million tonnes a year (t/y).

    The chemicals under study include styrene and polystyrene, acrylic acid and derivatives, polyols, methylene diphenyl diisocyanate (MDI), epoxy resins and linear alpha-olefins. These are widely used across construction, automotive, packaging, consumer goods, infrastructure and advanced manufacturing.

    Taziz, Germany-based chemicals producer Covestro and XRG – all wholly or majority-owned subsidiaries of Adnoc Group –  have launched a joint feasibility study to assess the development of a world-scale MDI plant in Ruwais Industrial City.

    The partners aim to establish a facility in the Taziz Industrial Chemicals Zone with a production capacity of 660,000 t/y of MDI. The study will evaluate the technical, commercial and economic feasibility of the proposed plant, with the aim of informing a future investment decision.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20622502/main.gif
    Indrajit Sen
  • Morocco extends deadline for El-Menzel pumped-storage plant

    15 October 2026

    Morocco’s Office National de l’Electricite (One) has extended the deadline for contractors to submit bids for the 362MW El-Menzel pumped-storage hydropower project.

    The new deadline is 25 November. Bids were previously due on 28 October.

    The project is located about 35 kilometres southeast of Sefrou in the Fes-Meknes region. The engineering, procurement and construction contract covers engineering, equipment supply, construction, installation and commissioning.

    The scope includes two reversible pump-turbine units, upper and lower reservoirs, underground water conduits, a 400kV substation and a transmission line connecting the facility to the national grid.

    One tendered the project in July following an earlier prequalification process that began in May 2023, when six consortiums submitted applications.

    Three consortiums were subsequently prequalified to bid for the main contract. These include:

    • China International Water & Electric Corporation (China) / Yellow River Engineering Consulting Company (China) / Harbin Electric International Company (China) / Harbin Electric Machinery Company (China) / Jet Contractors (Morocco)
    • Sinohydro (China) / Andritz Hydro (Austria)
    • Webuild (Italy) / Dongfang Electric International Corporation (China)

    The project aims to support Morocco’s renewable energy programme and help the country reach its target of sourcing 52% of its energy mix from renewables by 2030. It is being financed by the African Development Bank and Germany’s KfW Development Bank.

    One already operates the 464MW Afourer and 350MW Abdelmoumen pumped-storage stations, while the 300MW Ifahsa project is under development.

    In August, the Office National de l’Electricite et de l’Eau Potable (Onee) approved a MD248bn ($26.4bn) investment programme for 2026-30. The spending plan covers electricity and drinking water infrastructure.

    The programme allocates $21.9bn to electricity projects and $4.5bn to drinking water infrastructure. According to Onee, the private sector will finance about 72% of the investment.

    The electricity programme includes $11.1bn of investment to develop 11.6GW of renewable energy capacity and 2.6GW of energy storage. It also provides for 2,230MWh of battery energy storage systems, the El-Menzel pumped-storage hydropower plant and 3,744MW of gas-fired generation to support grid flexibility.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20621738/main.jpg
    Mark Dowdall
  • Contractors given extension on Riyadh airport aviation complex

    15 October 2026

     

    Contractors have been given an extension until 19 November to submit proposals for an estimated SR3bn ($817m) contract to build an aviation complex within the King Salman International airport master development in Riyadh.

    Government-owned aviation organisation Saudi Royal Aviation (SRA) tendered the contract in August, with an initial bid submission deadline of 8 October.

    Phase one of the programme comprised the concept design stage, which the design consultant has completed.

    SRA is now seeking to deliver the second phase, which covers design development, detailed design, procurement, construction, testing, commissioning and close-out of the works.

    The scope covers 30 landside buildings, including 16 screening areas and gates, plus 15 airside buildings, including four gates.

    The assets include maintenance hangars, workshops, office and administrative buildings (including interior fit-out), warehouses, storage, security and catering facilities, aprons and access roads, and site utilities and civil works.

    King Salman International airport will provide primary utilities to designated tie-in points, with the contractor taking responsibility from there.

    Although the site is within King Salman International airport’s boundaries, it is classified as landside and is a greenfield development. The contractor must therefore meet airport security, safety and access requirements, in addition to SRA’s own clearance processes.

    Project scale

    The King Salman International airport project covers an area of about 57 square kilometres (sq km), allowing for six parallel runways, and will include the existing terminals at King Khalid International airport. It will also include 12 sq km of airport support facilities, residential and recreational facilities, retail outlets and other logistics real estate.

    The airport aims to accommodate up to 100 million passengers by 2030. The goal for cargo is to process 2 million tonnes a year by 2030.

    Saudi Arabia plans to invest significantly in its aviation sector. The Saudi Aviation Strategy, announced by the General Authority of Civil Aviation, aims to triple Saudi Arabia’s annual passenger traffic to 330 million travellers by 2030.

    It also aims to increase air cargo traffic to 4.5 million tonnes and raise the country’s total air connections to more than 250 destinations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20619953/main.png
    Yasir Iqbal