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.
Register for MEED's guest program now to access this article.
Exclusive from Meed
-
Abu Dhabi seeks firms for Mid Island Parkway PPP15 May 2026
-
Oman seeks adviser for gas-fired IPPs15 May 2026
-
-
-
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
Abu Dhabi seeks firms for Mid Island Parkway PPP
15 May 2026
Register for MEED’s 14-day trial access
Modon Infrastructure, formerly known as Gridora, has invited firms to submit their registrations for the next phase of Abu Dhabi’s Mid Island Parkway Project (MIPP), which will be developed on a public-private partnership (PPP) basis.
The request for qualifications (RFQ) is expected to be issued to interested parties soon.
Modon Infrastructure will act as the lead developer with the majority of the equity in the project company. It will award the engineering, procurement, and construction contractor, the operations and maintenance providers, and the advisers.
The second phase of the MIPP involves the construction of about 11 kilometres (km) of highways, including a mix of three-, four- and five-lane highways. The highways will connect the Um-Yifeenah, Al-Jubail, Al-Sammaliyyah and Sas Al-Nakhl islands to Khalifa City and the E10 road.
The scope also covers the construction of three interchanges: the E20, E10 and Dumbbell interchanges on Al-Sammaliyyah Island.
The project includes several major structures, such as the E20 interchange featuring cast-in-place box girder and void slab bridges, and the E10 interchange with cast-in-place box girder bridges. It also includes I-girder bridges between Raha Beach West and Sas Al-Nakhl Island, as well as a causeway at Sas Al-Nakhl Island.
Further key elements include a cast-in-place balanced cantilever bridge between Sas Al-Nakhl Island and Al-Sammaliyyah Island, a tunnel between Al-Sammaliyyah Island and Bilrimaid Island, and a cut-and-cover (open) tunnel on Bilrimaid Island. The project is completed with another tunnel connecting Bilrimaid Island to Um-Yifeenah Island.
Abu Dhabi awarded three packages for phase one of the MIPP in 2024. The contract for package 1A was awarded to a joint venture of Turkish contractor Dogus Construction and UAE firm Gulf Contractors. Package 1B was awarded to a joint venture of Yas Projects (Alpha Dhabi Holding) and China Railway International Group. Beijing-headquartered China Harbour Engineering Company and the UAE’s Agility Engineering & Contracting Company won the contract for package 1C.
Phase one starts at the existing Saadiyat interchange, connecting the E12 to the MIPP, and ends at the recently constructed Um-Yifeenah highway.
It comprises a dual main road with a total length of 8km, including four traffic lanes in each direction, two interchanges, a tunnel and associated infrastructure works.
https://image.digitalinsightresearch.in/uploads/NewsArticle/16858325/main.jpg -
Oman seeks adviser for gas-fired IPPs
15 May 2026
Oman’s Nama Power & Water Procurement Company (PWP) has issued a request for proposals for technical consultancy services for the development of new gas-fired independent power projects (IPPs) in the sultanate.
The state offtaker said the projects will have a total capacity of up to 2,800MW.
The bid submission deadline is 17 June.
While Oman is accelerating investment in renewable energy and battery storage, gas-fired thermal generation is expected to remain a core part of the country’s power mix over the coming decade.
The Misfah and Duqm combined-cycle gas turbine power plants are advancing towards construction following the appointment of China-headquartered Shandong Electric Power Construction No. 3 Company (Sepco 3) and South Korea’s Doosan Enerbility as contractors.
According to Nama PWP’s 2025 annual report, the Duqm IPP will have a total capacity of 877MW, including 555MW of early power capacity, which is scheduled to commence in Q2 2028.
The Misfah IPP will have a total capacity of 1,700MW, including 1,203MW of early power capacity, which is scheduled to commence in the same quarter.
Nama PWP has also recently awarded new power-purchase agreements (PPAs) to three IPPs to extend the operating life of existing gas-fired power plants beyond the expiry of their current contracts.
The new agreements for the 750MW Sohar 2 IPP and 750MW Barka 3 IPP will take effect on 1 April 2028 and run until 31 March 2043. The agreement for the 200MW Sur IPP will commence on 1 April 2029 and run until 31 March 2044.
The awards form part of Nama PWP’s 2028-29 procurement programme. The programme aims to secure firm generation capacity from existing assets whose current PPAs are due to expire during that period.
https://image.digitalinsightresearch.in/uploads/NewsArticle/16857037/main4750.jpg -
Alghanim submits lowest offer for Kuwait oil refinery project
15 May 2026
Kuwait’s Alghanim International General Trading & Contracting has submitted the lowest bid for a contract to upgrade the country’s Mina Al-Ahmadi (MAA) refinery.
The client is state-owned downstream operator Kuwait National Petroleum Company (KNPC). The project scope covers upgrades to water transmission and storage infrastructure at the refinery.
The contract will be delivered under an engineering, procurement and construction (EPC) model. The tender was issued in October 2025 with an initial bid deadline of 4 January 2026, which was later extended several times. The most recent rescheduling moved the deadline from 19 April to 10 May.
Alghanim submitted a bid of KD37.0m ($120m), significantly lower than the other two bidders, both Kuwait-based: Heavy Engineering Industries & Shipbuilding Company (Heisco) at KD60.6m ($197m) and Gulf Spic General Trading & Contracting at KD63.9m ($207m).
The project is expected to take two years to complete and will expand water storage capacity at the facility by extending existing tanks or constructing new ones. The contractor will also develop associated infrastructure and upgrade systems that transport desalinated water to the refinery, including pipelines and related equipment.
In its 2024-25 annual report, KNPC said the project will help meet water demand for the facility’s refining and gas production units.
https://image.digitalinsightresearch.in/uploads/NewsArticle/16852744/main.jpg -
Civil and piping work starts on Iraq field development
15 May 2026
Civil works and piping work have started for the project to develop a second central processing facility (CPF) at Iraq’s Ratawi oil and gas field, according to industry sources.
The project is part of the $27bn Gas Growth Integrated Project (GGIP), which is being developed by TotalEnergies along with its partners Basra Oil Company (BOC) and Qatar Energy.
Phase one of the GGIP is expected to be worth about $10bn.
Work is progressing on the project despite logistical problems related to the regional conflict that broke out after the US and Israel attacked Iran on 28 February.
While early works are ongoing, equipment needed for later stages of the project is being delayed as it was due to be transported to the project site using ships that would have travelled through the Strait of Hormuz.
Shipping through the Strait is still severely disrupted due to the regional conflict.
In September, Turkiye’s Enka signed a contract to develop the second CPF at Iraq’s Ratawi field as part of the second phase of the field’s development.
Enka did not give a value for the contract, but it is believed to be worth more than $1bn.
In November, US-based KBR was selected by Enka to provide detailed design services for the project.
Enka’s contract covers the engineering, procurement, supply, construction and commissioning of the CPF for the project known as the Associated Gas Upstream Project Phase 2 (AGUP2).
The aim of the AGUP2 project is to process oil and associated gas from the Ratawi oil field to increase production capacity to 210,000 barrels a day of oil and 154 million standard cubic feet a day of gas.
GGIP masterplan
The GGIP programme is being led by TotalEnergies, the operator, which holds a 45% stake.
Basra Oil Company and QatarEnergy hold 30% and 25% stakes, respectively. The consortium formalised the investment agreement with the Iraqi government in September 2021.
The four projects that comprise the GGIP are:
- The Common Seawater Supply Project (CSSP)
- The Ratawi gas processing complex
- A 1GW solar power project for Iraq’s electricity ministry
- A field development project at Ratawi, known as the Associated Gas Upstream Project (AGUP)
The CSSP is designed to support oil production in Iraq’s southern oil and gas fields – mainly Zubair, Rumaila, Majnoon, West Qurna and Ratawi – by delivering treated seawater for injection, a method used to boost crude recovery rates and improve long-term reservoir performance.
China Petroleum Engineering & Construction Corporation (CPECC) won a $1.61bn contract in May to execute EPC work for the gas processing complex at the Ratawi field development.
CPECC’s project team based in its Dubai office is performing detailed engineering work on the project.
In August last year, TotalEnergies awarded China Energy Engineering International Group the engineering, procurement and construction (EPC) contract for the 1GW solar project at the Ratawi field. A month later, QatarEnergy signed an agreement with TotalEnergies to acquire a 50% interest in the project.
The 1GW Ratawi solar scheme will be developed in phases, with each phase coming online between 2025 and 2027. It will have the capacity to provide electricity to about 350,000 homes in Iraq’s Basra region.
The project, consisting of 2 million bifacial solar panels mounted on single-axis trackers, will include the design, procurement, construction and commissioning of the photovoltaic power station site and 132kV booster station.
Separately, in June, TotalEnergies awarded China Petroleum Pipeline Engineering an EPC contract worth $294m to build a pipeline as part of a package known as the Ratawi Gas Midstream Pipeline.
Also, TotalEnergies awarded UK-based consultant Wood Group a pair of engineering framework agreements in April, worth a combined $11m, under the GGIP scheme.
The agreements have a three-year term under which Wood will support TotalEnergies in advancing the AGUP.
One of the aims of the AGUP is to debottleneck and upgrade existing facilities to increase production capacity to 120,000 b/d of oil on completion of the first phase, according to a statement by Wood.
READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDFGlobal energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.
Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
> REGIONAL LNG: War undermines business case for Middle East LNG> CAPITAL MARKETS: Damage avoidance frames debt issuance> MARKET FOCUS: Conflict tests UAE diversificationTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/16852654/main.png -
Abu Dhabi selects Yas Island site for $1.7bn Sphere venue
14 May 2026
Abu Dhabi’s Department of Culture & Tourism (DCT Abu Dhabi) and US-based Sphere Entertainment have selected Yas Island as the location for the $1.7bn Sphere Abu Dhabi project.
The venue will be built on a plot between Yas Mall and SeaWorld Abu Dhabi, close to Yas Island’s theme parks and attractions. Construction is expected to be completed by the end of 2029. Dubai-listed Alec is understood to be the selected contractor and has been working on the project’s pre-construction phase.
The project will be the first Sphere venue outside the US. It is expected to echo the scale of Sphere Las Vegas, with a capacity of up to 20,000 depending on configuration.
DCT Abu Dhabi said it will coordinate enabling and infrastructure works with Abu Dhabi entities, including the Department of Municipalities & Transport and its Integrated Transport Centre, the Department of Energy, Taqa, Etihad Rail and Aldar. The scope includes road enhancements, site access and site-wide infrastructure integrated with surrounding Yas Island assets.
Sphere Abu Dhabi is the latest addition to Abu Dhabi’s integrated tourism and destination-development pipeline on Yas Island, alongside major attractions and the Disney theme park resort that was announced in 2025.
DCT and Sphere Entertainment finalised an agreement last year related to the construction, development and operation of the Sphere entertainment venue in Abu Dhabi. According to the agreement, Sphere Entertainment granted DCT the exclusive rights to build and operate the Sphere Abu Dhabi entertainment venue.
https://image.digitalinsightresearch.in/uploads/NewsArticle/16837302/main.gif