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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.

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James Gavin

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  • Bahrain construction faces major slowdown

    5 November 2025

     

    Bahrain’s construction and transport sector has struggled to stay afloat in recent years, with the total value of awarded contracts falling for the third consecutive year.

    According to regional projects tracker MEED Projects, only about $400m-worth of contracts had been awarded in Bahrain by the end of October – less than half the $1.2bn recorded during the same period last year.

    The sector has yet to return to its pre-pandemic levels. Before 2020, Bahrain consistently awarded more than $2bn in contracts annually, peaking at nearly $4bn in 2016, when the contract to build a new terminal at Bahrain International airport was awarded.

    Contract awards

    The largest contract award this year is an estimated $77m agreement between Bahrain’s Ministry of Works and local construction firm Haji Hassan Group to expand the Budaiya Highway project.

    Another major deal, valued at about $50m, was awarded to local firm Nass Contracting for the second phase of the Muharraq Ring Road.

    All other contracts awarded so far this year have been below the $50m mark. These include a $40m contract awarded to local firm United Marine Trading for the construction of a superyacht marina.

    Other contracts include the $38m Tilal Residential Development awarded to Manama-based Ahmed Omar Group, and a $35m contract awarded to RP Construction for a mixed-use project in the second phase of Edamah’s Saadah development.

    Future prospects

    Several large-scale real estate schemes form the bulk of Bahrain’s $5bn pipeline of upcoming construction projects. These include five reclaimed islands, the largest of which is Fasht Al-Jarim – a 183-square-kilometre mixed-use hub that will host a new airport alongside residential, logistics and tourism zones.

    Tendering is also ongoing for several real estate-related schemes.

    In September, consultants submitted bids for a tender covering contract management and site supervision for 1,269 villas in East Sitra. The project represents the second phase of the East Sitra social housing development.

    In October, firms submitted bids for infrastructure works covering 477 residential plots in Block 589 of Madinat Salman Island 10. The project is being developed by Bahrain’s Ministry of Housing & Urban Planning.

    Bid evaluation has also reached advanced stages for a tender covering the construction of 507 villas in Madinat Al-Hidd – Villages A2 and A3. 

    While the real estate sector is expected to provide much-needed short-term momentum, it is longer-term infrastructure schemes that will underpin sustained growth in Bahrain’s construction and transport market in the coming years.

    Transport projects

    Long-term projects expected to generate market opportunities include the Bahrain Metro scheme, for which the client prequalified several consortiums in 2023 to bid for the main contract.

    Another major infrastructure scheme expected to advance soon is the second causeway linking Bahrain and Saudi Arabia. In 2023, selected construction firms submitted feedback questionnaires and met with the King Fahd Causeway Authority regarding the estimated $3.5bn crossing.

    The project involves constructing a 25-kilometre road-and-rail crossing connecting Saudi Arabia and Bahrain. 

    The second causeway involves building a 25-kilometre road and rail crossing that will link Saudi Arabia and Bahrain. It will follow the same alignment as the existing King Fahd Causeway.

    Progress is also being made on the Qatar-Bahrain causeway project. Last year, Qatar and Bahrain agreed to restructure the board of directors for the estimated $4bn scheme.

    The decision followed a November 2023 meeting between officials from both countries, where they agreed to restart the project.

    The project was put on hold in 2010 and effectively cancelled during the Gulf diplomatic dispute in 2017. The restoration of diplomatic ties between Bahrain and Qatar has revived prospects for the project to move forward.

    The proposed causeway is a key component of the GCC rail network. After years of slow progress, work on the regional rail scheme has recently accelerated, with design activities advancing on several cross-border links.

    In the short term, tendering is expected to begin shortly for the widening and upgrading of the Sheikh Jaber Al-Ahmad Highway project, after US-based Parsons Corporation was awarded a $1.4m contract to provide pre-contract engineering consultancy services.

    The contract for package four of the Busaiteen Link Road scheme is also expected to be finalised soon, after local firm Haji Hassan Group submitted the lowest bid, valued at $277m.

    The package includes the construction of a signature bridge connecting Muharraq to the North Manama Causeway and Bahrain Bay.

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  • Bahrain remains in pursuit of hydrocarbon resources

    5 November 2025

     

    Bahrain, which holds relatively modest hydrocarbon reserves compared with its Gulf peers, has been consistently seeking additional resources to boost its oil and gas production.

    The country made a major step towards this goal in 2018, announcing the discovery of the Khalij Al-Bahrain offshore hydrocarbons basin, estimated to contain 80 billion barrels of oil and 10-20 trillion cubic feet of gas. Nearly seven years later, however, Manama is not known to have made any notable progress in commercially appraising that resource base.

    The state-owned enterprise Bapco Energies has therefore devised a multi-pronged strategy to secure Bahrain’s energy future. Its first objective, according to group CEO Mark Thomas, is to maintain current oil and gas output levels.

    “Objective number one is to stabilise oil and gas production from the existing reservoirs at the Awali field and stem the decline. These are very mature reservoirs, which, without intervention, will decline quite quickly,” Thomas told MEED in an interview earlier this year.

    Bahrain’s primary oil and gas production comes from the Awali field, where the Gulf’s first oil discovery was made in 1932. Bapco Upstream, a subsidiary of Bapco Energies, is the sole operator of this onshore field, also known as the Bahrain field. The field produces an average of 42,400 barrels a day (b/d) of crude oil and 1.67 billion cubic feet a day of non-associated gas.

    In addition, Bapco Energies draws in about half of the 300,000 b/d output from the Abu Safah offshore field, which Bahrain shares with Saudi Arabia.

    “Objective number two is to develop new opportunities,” Thomas said, adding: “We’ve been looking at appraising pre-Unayzah gas from the Al-Jawf and Al-Juba reservoirs,” which Bapco Energies announced discovering in 2022.

    “These are deep gas reservoirs, so we call them unconventional. They’re tight rock, need to be fracked and require the drilling of horizontal wells for production. We’ve gone through an appraisal programme on that. We’ll start a development programme in 2025 around those [discoveries],” Thomas said at the time.

    Exploration campaign

    In March, Bapco Energies announced an agreement with US-based EOG Resources to “evaluate a promising gas exploration prospect” in the country, without specifying its location.

    Later in the year, Bahrain’s Oil & Environment Ministry signed a concession agreement with Bapco Energies and EOG Resources to explore potential hydrocarbon resources.

    Under the contract, EOG Resources Bahrain Awali – the company’s local subsidiary – will work with Bapco Energies to explore, appraise and develop oil and gas reserves in Bahrain. Bapco Energies has not disclosed the nature, terms or scope of activities under the concession agreement.

    Thomas had told MEED that Bapco Energies was advancing a “large three-dimensional (3D) seismic programme” to search for offshore hydrocarbon resources. 

    “We’re running an extensive campaign covering about 4,500 square kilometres of surface area, where we will be shooting 3D seismic. That is basically around the entirety of [Bahrain]. We will carry on through 2025 and into 2026.

    “We hope to be able to identify some structures and then invite companies to come, share the information with them and hopefully do some exploration drilling,” he added. 

    “It’s logical that there will be [a licensing round in the future], assuming that we are successful with the 3D seismic and can identify some structures. But it needs to wait until we have some quality data. 

    “This has always been the hindrance for us in attracting international oil companies to come to Bahrain,” he noted. “The quality of the data that we had for offshore was not good and, quite frankly, for a company entering a new country, the risk was too high.”

    Italian energy producer Eni has been the only international company evaluating exploration and production opportunities in Bahrain in recent years.

    “By using the latest technology with 3D seismic seabed nodes, and by shooting deeper, we will absolutely have the best data that we can. And, if there are structures offshore, we will definitely find them,” Thomas told MEED.

    Despite an oil production capacity of only about 205,000 b/d, Bahrain holds a key seat in the Opec+ coalition. Bapco Energies aims to maintain, if not increase, its oil and gas production levels through capital expenditure on projects.

    Main image: View of Bahrain's first oil well at the country's Oil Museum

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  • Mergers loom over Bahrain’s banking system

    5 November 2025

     

    The memorandum of understanding signed between National Bank of Bahrain (NBB) and Bank of Bahrain and Kuwait (BBK) on 2 November, advancing talks towards a formal merger, provides a welcome boost to a banking sector that has felt the headwinds of Bahrain’s challenging economic situation.

    Building scale is a key ambition for Bahraini banks, and recent merger activity has helped local lenders find synergies, sometimes through acquisition from non-Bahraini peers. 

    The Kuwait Finance House (KFH) acquisition of Ahli United Bank (AUB) in October 2022 helped forge one of the Gulf’s largest players. The local Al-Salam Bank completed the acquisition of the consumer banking business of Ithmaar Bank that year, building one of the island’s largest sharia-compliant lenders.

    More recently, HSBC Bank’s Bahrain branch has transferred its retail banking business to BBK, an example of a domestic player taking assets off a foreign institution. Kuwait’s Burgan Bank, meanwhile, completed in Q1 2025 the acquisition of Bahrain’s United Gulf Bank (UGB) for $190m.    

    NBB and BBK would make for a robust marriage of two large conventional Bahraini lenders. The former saw its assets grow 8% year-on-year to BD5.97bn ($15.8bn) in H1 2025, while BBK’s assets as of the end of September 2025 stood at BD4.6bn ($12.2bn), up 9.6% on the same period last year. 

    This looming combination would have heft in a banking system marked by a large number of institutions (83 in total in September).

    A joint statement from the two banks said that should the merger proceed, it “has the potential to create a stronger, more dynamic and forward-looking entity with enhanced scale, agility, and capabilities”.

    Market adjustment

    The likely outcome of a stronger bank with a higher market share is a positive for Bahrain. And yet, given the banks’ continued exposure to a sovereign with weak finances and an overreliance on oil revenues, the simple fact of merging does not override existing challenges. 

    Although Manama boasts some of the Gulf’s longest-established banking institutions, these are still subject to a rating environment reflective of a country with a debt-to-GDP ratio forecast to rise to 136% in 2026, according to Fitch Ratings. The fiscal deficit is expected to remain around 9% of GDP through 2026, driven by high interest costs and reliance on oil revenue.

    This has real-world impacts on the banking system. In April 2025, Fitch revised Bahrain’s outlook to negative, noting that while it benefits from strong financial support from GCC partners, the ratings agency identified low foreign reserves and high external debt as posing significant risks.  

    By way of illustration, NBB’s main exposure is to the Bahraini sovereign (at BD1.8bn – $4.8bn – or 3.3x common equity Tier 1 (CET1) capital, at end-2024), mostly in the form of debt securities, but also in lending to the government and Treasury bills. NBB is also exposed to the sovereign through lending to quasi-government entities, notes Fitch.

    Fitch-rated Bahraini banks are constrained by the sovereign rating of ‘B+’ or capped by Bahrain’s country ceiling. “Despite this, these banks’ standalone financial profiles and metrics in particular compare well with some higher-rated GCC peers,” says Amin Sakhri, director, Financial Institutions for Fitch Ratings.

    “We see a lot of common features in relation to the operating environment to the rest of the GCC,” says Sakhri. “Bahrain is highly dependent on government spending, and highly dependent on oil prices. But the difference is that, in the case of Bahrain, the sovereign rating is lower, which leads to a less dynamic operating environment – particularly in terms of the ability of the sovereign to stimulate the economy relative to other GCC banking sectors.”

    Sustained asset strength

    Although this has a detrimental effect on the operating environment relative to other countries, Bahraini banks have sufficient armoury to protect themselves from sovereign-linked fiscal challenges.

    “Looking at the metrics, capital buffers have remained fairly sound in 2025 and the performance has also been stable relative to 2024, so there’s nothing to cause concern. One of the key strengths of the banking sector remains capitalisation levels,” says Sakhri.

    According to the analyst, banks such as NBB and BBK are showing strong capital buffers, comparing favourably with GCC peers, and asset quality metrics are not necessarily weaker than at banks in the banking sectors of Qatar (BB operating environment), the UAE (BBB+) or Saudi Arabia (BBB+).

    Another source of comfort is that two out of the five Fitch-rated Bahraini banks are very little exposed to the domestic operating environment and their ratings are not constrained by Bahrain’s sovereign rating. 

    The financial sector remains a prop of the Bahraini economy. Central Bank of Bahrain governor Khalid Humaidan told a meeting of regional bank governors in mid-October that financial services was the largest sectoral contributor to the national economy, accounting for 17% of GDP.

    Humaidan also noted that digital advancements are helping to enhance credit access and support small businesses.

    “Projects are being deployed by the Bahraini government, albeit at a more modest level than in other places in the GCC, given the sovereign’s weaker financial flexibility,” says Sakhri.

    While credit growth is well below the high rates seen in some neighbouring economies, analysts see room for a respectable performance.

    “A lending growth of about 5%-6% next year for the sector can be expected, despite the weaker operating environment score relative to other GCC countries,” says Sakhri. 

    One new lending opportunity may come through a government plan to boost housing. The  Ministry of Housing & Urban Planning launched a new financing option, Tasheel+, earlier this year, in collaboration with local banks. Lenders will provide financing, while the ministry will cover government support payments directly to the banks.

    The CBB is also looking to burnish its reputation as a leading regulator, having established the region’s first fintech sandbox as far back as mid-2017. It has recently developed a new framework for stablecoins. More recently, the CBB announced the launch of an SME Fund, after a strategic agreement between Bahrain Development Bank, NBB, BBK and Al-Salam Bank.

    These initiatives, combined with recent M&A moves, should give added impetus to a banking sector that is looking to exert a more dynamic impact on the local and regional economy.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15024060/main.gif
    James Gavin
  • Emaar launches Terra Gardens project in Expo City

    5 November 2025

    Dubai-based real estate developer Emaar Properties has launched the Terra Gardens residential project in partnership with Dubai World Trade Centre at Expo City Dubai.

    The development will offer 560 one-, two- and three-bedroom apartments and townhouses.

    Terra Gardens will be located adjacent to Expo Mall.

    The development is part of the Expo Living masterplan, which spans 451,295 square metres. The masterplan comprises five residential communities with a total of 3,555 residential units.

    Terra Gardens follows the launch last month of Emaar Hills, a new masterplanned community adjacent to Dubai Hills Estate.

    Emaar Hills will offer more than 40,000 residential units.

    It will include a limited collection of mansions ranging from 10,000 to 20,000 square feet.

    Emaar Hills will also feature a golf course, retail amenities, and other wellness and leisure facilities.

    Emaar has also purchased a land bank in the Ras Al-Khor area adjacent to its Dubai Creek Harbour masterplan, as disclosed in its H1 2025 financial report. Emaar plans to launch another masterplanned community on that plot in the near future.

    Emaar’s latest project launch reflects increased activity in the UAE real estate market, which has led major developers to report record revenues in recent years. 

    Dubai Financial Market‑listed Emaar Properties reported a net profit of AED7.1bn ($1.9bn) in H1 2025, a 33% increase compared with the same period last year.

    The developer's revenues surged to AED19.8bn in the first half of this year, which is a 38% increase from H1 2024.

    Emaar said that this was driven by “robust performance across development, retail, hospitality and international operations".

    Emaar has sold inventory worth AED46bn in H1 2025, which is 46% higher than the same period last year.

    UK-based data analytics firm GlobalData predicts the UAE construction sector to grow by 4.2% in real terms in 2025, driven by infrastructure, energy, utilities and residential construction projects. It is also estimated that projects worth more than $323bn are in the execution or planning stages in the UAE.

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  • Decision imminent for UAE West Link project

    5 November 2025

     

    The UAE’s Etihad Rail is expected to finalise the contract by next month to build the 40-kilometre West Link project, which will connect the Abu Dhabi mainland to islands in the Gulf near Qatar.

    “The early contractor involvement (ECI) bid evaluation is in advanced stages, and the decision is expected in a few weeks,” sources close to the project told MEED.

    In June, MEED reported that the UAE had engaged two contracting groups on an ECI basis for the project.

    The two contracting groups selected are: Greece’s Archirodon partnering with local Western Bainoona Group (with Hewson Consulting as design firm), and Beijing-based China Harbour Engineering Corporation partnering with local NMDC (with Subana Jurong as design firm).

    The project involves constructing a 40km road link with two lanes in each direction. The road is planned to start near Ras Ghumais in the Western Region and extend to a ferry terminal on Makasib Island, which will then connect to Qatar.

    The ECI process requires selected contractors to submit methodologies for the project and a design proposal during the initial stages of procurement. It is understood that the conceptual design and social, economic and business case studies commenced early last year.

    The project is being overseen by the UAE’s Etihad Rail.

    Previous plans

    In 2005, Abu Dhabi and Doha were reported to have been setting up a joint company to oversee the implementation of a proposed UAE-Qatar causeway.

    The crossing would have significantly cut journey times. At present, traffic between Qatar and the UAE has to pass through 125km of Saudi Arabian territory.

    Back then, the causeway was planned to start near Sila in Abu Dhabi and extend to the south of Doha.

    The scheme ultimately stalled. Problems included difficulties with the route, which infringed on Saudi Arabia’s territorial waters.

    In June 2017, the UAE, Saudi Arabia, Bahrain and Egypt severed diplomatic and economic ties with Qatar, preventing any potential joint infrastructure projects.

    In January 2021, the Al-Ula Declaration restored diplomatic ties, and economic cooperation has gradually resumed.

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