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
  • Firms submit Jebel Ali sewage PPP prequalifications

    24 July 2026

     

    Dubai Municipality received statements of qualification on 23 July from firms interested in delivering phase three of the Jebel Ali sewage treatment plant (STP) expansion project.

    Known as DS150/3, the project will be delivered under a public-private partnership (PPP) model on a design, build, finance, own, operate and transfer basis.

    The project involves the development of a new water resource recovery facility with an ultimate treatment capacity of up to 1 million cubic metres a day (cm/d).

    It is being procured through Dubai Municipality’s sewerage and recycled water projects department and will be delivered via a two-stage operational approach over a 30-year concession period.

    It is understood that the following firms are among those likely to qualify for the project:

    • Acciona (Spain)
    • Alkhorayef (Saudi Arabia)
    • Besix (Belgium)
    • Etihad WE (UAE)
    • GS Inima (Spain)
    • Metito (UAE)
    • Miahona (Saudi Arabia) 
    • Samsung E&A (South Korea)
    • Saur (France)
    • Suez (France)
    • Taqa Water Solutions (UAE)
    • Veolia (France)

    The municipality issued a request for qualifications notice in May with an intial bid submission deadline of 18 June. UK-headquartered Deloitte is acting as financial adviser, Aecom is the project's technical adviser and CMS is the legal adviser.

    Dubai Municipality said the project will also include additional land uses and community-focused amenities as part of broader sustainability and urban integration objectives.

    Phase one and two expansion

    On 9 July, firms submitted bids for an engineering, procurement and construction contract covering the expansion of the Jebel Ali STP phases one and two.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d, following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cm/d, with the expansion estimated to cost $300m.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17735401/main.jpg
    Mark Dowdall
  • Contractors submit interest for Riyadh Expo substructure

    24 July 2026

     

    Contractors have submitted expressions of interest on 23 July for a contract to deliver the early works and substructure works for several assets at the Expo 2030 Riyadh site.

    Expo 2030 Riyadh Company (ERC) is tasked with delivering the Expo 2030 Riyadh venue. Saudi sovereign wealth vehicle, the Public Investment Fund, launched ERC – a wholly owned subsidiary – in June 2025 to build and operate facilities for the event.

    The assets include the Icon; the convention centre; and thematic pavilions, including the Culture of Wisdom, Place & Planet and Adaptation & Innovation pavilions.

    The Icon will be located at the entrance of the Expo 2030 Riyadh site, within the Collaboration Precinct.

    The structure will be connected to the metro station and will serve as a gateway to the event.

    It will be 66 metres tall and will comprise an observation platform, food and beverage (F&B) outlets and other features.

    The convention centre will cover about 22,000 square metres. It will be the first point of arrival for visitors to the expo.

    The Culture of Wisdom pavilion will be a 25-metre-tall building that will feature exhibition galleries, innovation laboratories and conference and learning spaces.

    The Place & Planet building will also be 25 metres tall, and will include indoor and outdoor exhibition spaces, F&B and retail facilities and support areas.

    The Adaptation & Innovation pavilion will be located within the Loop of Nations precinct and will comprise a 29-metre-tall building.

    Construction progress

    The tendering of the pavilion structures followed progress on the site’s infrastructure development works.

    In April, ERC awarded two contracts for the next phase of infrastructure works at the site to local firm Al-Yamama Company.

    The scope covered the construction of road networks and infrastructure for water, sewage, electricity, telecommunications and electric vehicle charging.

    These awards followed ERC’s January award of an estimated SR1bn ($267m) contract for initial infrastructure works at the site to local firm Nesma & Partners. That scope covered about 50 kilometres of integrated infrastructure networks, including internal roads and essential utilities such as water, sewage, electrical and communications systems, and electric vehicle charging stations.

    The overall infrastructure works – covering the construction of main utilities and civil works at Expo 2030 Riyadh – are split into three packages:

    • Lot 1 covers the main utilities corridor;
    • Lot 2 includes the northern cluster of the Nature Corridor;
    • Lot 3 comprises the southern cluster of the Nature Corridor. 

    The masterplan encompasses an area of 6 square kilometres, making it one of the largest sites ever designated for a World Expo event. Situated to the north of the Saudi capital, the site will be located near the future King Salman International airport and will provide direct access to landmarks within Riyadh.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17739044/main.jpg
    Yasir Iqbal
  • Oil price rises above $100 a barrel after Red Sea attacks

    24 July 2026

    Oil prices rose to their highest level in nearly two months on 23 July after the latest escalation in the US-Iran conflict threatened severe new disruptions to global energy supplies.

    Global benchmark Brent crude closed 7% higher, at $100.69 a barrel on 23 July. Earlier in the trading day, it rose as high as $102 a barrel. That is its highest level in eight weeks, since the end of May.

    Brent was trading at over $100 a barrel in the early hours of 24 July, but later pared gains to settle around $99.63 a barrel as of 11am Gulf Standard Time (GST).

    The surge in the Brent price came after Iran-backed Houthi rebels claimed attacks on two Saudi oil tankers in the Red Sea following their announcement of a naval blockade on Saudi Arabia.

    It appeared to be the first time since the regional war began that attacks on oil tankers and other commercial ships had extended beyond the Strait of Hormuz, opening up a new front in the volatile conflict.

    The Houthi threat is unsettling to oil markets because millions of barrels a day pass through the Bab El-Mandeb Strait to reach global markets.

    ALSO READ: Opec+ holds the line on unwinding of production cuts

    About 12%-15% of global maritime trade, worth more than $1tn, transits the waterway every year.

    It has also served as an alternative to the Strait of Hormuz, where traffic remains largely at a standstill, with ship crossings falling to single digits on 21 July.

    Since the start of July, oil prices have risen about 35%. Those prices are more than 60% higher than at the start of the year. This has erased much of the progress made in bringing prices down after the US and Iran signed a memorandum of understanding in mid-June.

    The interim peace deal has now collapsed, with US President Donald Trump threatening on 22 July to blow up an Iranian bridge or power plant for every vessel Tehran attacks.

    This was followed by the Houthi claim to have hit two tankers in the Red Sea.

    The UK’s Maritime Trade Office reported a tanker “struck by an unknown projectile” north of the Bab El-Mandeb Strait, and state-run Saudi Press Agency (Spa) reported that a vessel named Encelia was set ablaze by an attack while it was sailing overnight in the Red Sea, citing an unidentified source from the General Authority of Transport. Spa did not mention the other vessel, which is understood to be called Layla.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17739553/main4051.jpg
    Indrajit Sen
  • Qiddiya tenders Dragon Ball theme park package

    24 July 2026

     

    Qiddiya Investment Company (QIC) has tendered a contract to undertake the back-of-house works on the Dragon Ball theme park in Qiddiya, Saudi Arabia.

    The scope covers the construction of plant rooms, facilities management buildings, workshops, storage warehouses and central processing kitchens.

    It also includes a monorail service depot, a fire station, parking, utilities and other associated infrastructure.

    The bid submission deadline is 13 September.

    The Dragon Ball theme park will cover more than 500,000 square metres and will have seven themed zones inspired by the Japanese media franchise, including Kame House, Capsule Corporation and Beerus’ Planet.

    The park will offer more than 30 rides with five main attractions, including a rollercoaster that passes through a 70-metre landmark based on the series’ wish-granting dragon Shenron. 

    The development will also include themed hotels.

    In September 2024, US-based firm Falcon’s Creative Group announced that it is undertaking the masterplan and attraction design and is the creative lead for the theme park.

    QIC formally launched the Dragon Ball theme park in March 2024.

    The announcement came after QIC signed an agreement with Japanese firm Toei Animation, the producer of the Dragon Ball anime series.

    The Dragon Ball theme park is one of several major projects within the wider Qiddiya development. Other projects include an e-games arena, Prince Mohammed Bin Salman Stadium, a horse racing venue, a performing arts centre, the Speed Park and Six Flags theme parks and Aquarabia waterpark.

    The project is a key part of Riyadh’s strategy to boost leisure tourism in the kingdom. According to UK analytics firm GlobalData, leisure tourism in Saudi Arabia has experienced significant growth in recent years.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17738622/main.jpg
    Yasir Iqbal
  • Saudi Arabia appoints developer for hybrid power plant

    24 July 2026

     

    Saudi Arabia-based Lamar Holding has signed a contract to develop a hybrid power plant at the Empty Quarter (Rub Al-Khali) land port in Saudi Arabia, according to a source.

    The public-private partnership (PPP) project aims to reduce diesel fuel use with renewable energy and ensure a long-term power supply at the Empty Quarter land port. It includes the construction of 15MW of total hybrid installed capacity, installation of a 7 megawatt-peak solar photovoltaic system and eight 1MW internal combustion engines.

    In March, MEED exclusively reported that Lamar had been given preferred bidder status and was in advanced discussions with Saudi Arabia’s Zakat, Tax & Customs Authority (Zatca) for the contract.

    MEED understands that the proposed plant will have the capacity to produce 25 gigawatt-hours of electricity annually. It will be implemented under a design, build, finance, operate, maintain and transfer contract model for 25 years, excluding the construction period.

    US/India-based Synergy Consulting is acting as financial advisor to Lamar on the project. Egyptian firm Eternal Consultation Engineering Services is acting as the technical support consultant and Dubai-headquartered Aktech is the technical consultant for the project.

    Lamar Holding and Dubai’s SirajPower submitted bids for the Empty Quarter hybrid power plant project in July 2025, as previously reported by MEED.

    Zatca, in collaboration with the National Centre for Privatisation & PPP, had previously prequalified the following four companies to bid for the contract in October 2024:

    • Alfanar Company (Saudi Arabia)
    • Lamar Holding (Saudi Arabia)
    • Olayan Energy (Saudi Arabia) / Enerwhere Sustainable Energy (UAE)
    • Siraj Power for Renewable Energy (UAE)

    Prior to that, in July 2024, 12 Saudi companies and local branches of international companies, along with 11 overseas-based companies, submitted statements of qualifications for the contract.

    In addition to building and operating the power plant, the project scope includes ensuring the facility operates to defined requirements and output specifications. It also involves managing power generation and the connection to the Zatca interface point for the entire project term.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17733327/main.jpg
    Mark Dowdall