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
  • Bahrain’s economy walks precarious path

    26 November 2025

    Download the PDF

    MEED’s December 2025 report on Bahrain includes:

    > COMMENT: Manama pursues reform amid strain
    > GVT & ECONOMY: Bahrain’s cautious economic evolution
    > BANKING: Mergers loom over Bahrain’s banking system
    > OIL & GAS: Bahrain remains in pursuit of hydrocarbon resources
    > POWER & WATER: Bahrain advances utility reform
    > CONSTRUCTION: Bahrain construction faces major slowdown
    > TRANSPORT: Air Asia aviation deal boosts connectivity

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15159666/main.gif
    MEED Editorial
  • Rua Al-Madinah signs hotel operations agreement

    26 November 2025

    Saudi Arabia’s Rua Al-Madinah, the Public Investment Fund (PIF) subsidiary tasked with Medina’s tourism and cultural development, has signed a hotel operations and management agreement with Adeera Hospitality for its Rua Al-Madinah project.

    Adeera Hospitality, which PIF also backs, will operate two buildings comprising 250 hotel rooms and 120 residential units under its Alia brand within the Rua Al-Madinah project, which is being developed near the Prophet’s Mosque.

    Adeera joins Rua Al-Madinah’s roster of hotel operators, which includes leading global hospitality brands such as Marriott, Hyatt, Accor and Hilton.

    The Rua Al-Madinah development includes the construction of 18 hotels under three categories – three-star, four-star and five-star – as well as secondary infrastructure.

    The towers will range in height from 11 to 21 storeys.

    Rua Al-Madinah estimates that superblock five will require 430,000 cubic metres of concrete, 875,000 square metres of block wall, 423,000 sq m of drywall, 74,000 tonnes of steel rebar, 215,000 sq m of tiles, and 228,000 sq m of facades, curtain walls and windows.

    The hotels, which will mainly provide accommodation for pilgrims visiting the holy city, will have a built-up area of about 65,000 sq m.

    In February last year, the client awarded two contracts worth SR300m ($80m) to international consulting firms for work on the superblocks four and five components of the Rua Al-Madinah project.

    Rua Al-Madinah signed a contract with US-based engineering firm Jacobs for design consultancy services for 12 hotels and other infrastructure for superblock four of the project.

    Another contract was signed with US-based KEO International Consultants to oversee the implementation of the superblock five project.

    Other consultants working on superblock five include US-based Perkins Eastman and Singapore-based Meinhardt. 

    UAE-based Ema Design is the interior designer.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15158923/main.jpg
    Yasir Iqbal
  • Meraas confirms $517m The Acres villas contract award

    26 November 2025

    Dubai-based real estate developer Meraas, now part of Dubai Holding Group, has confirmed that it has awarded a AED1.9bn ($517m) contract to build 642 three-, four- and five-bedroom villas as part of the first phase of its residential community, The Acres, in Dubailand.

    The contract was awarded to the local firm United Engineering Construction Company.

    MEED exclusively reported in August that Meraas had awarded the contract for the project.

    The Acres project is designed by local architectural practice U+A Architects.

    The masterplan includes 1,200 villas ranging from three to seven bedrooms.

    It also features a nursery, school, clinic, mosques, clubhouses, a retail zone, a 2,000-square-metre garden, walking and biking trails, an outdoor gym, children’s playgrounds, swimming pools and sports facilities.

    The latest announcement follows Meraas awarding a AED440m ($120m) contract for the construction of the Northline residential project in the Al-Wasl area of Dubai.

    The contract was awarded to the local GCC Contracting Company.

    The project includes the construction of three residential buildings. Construction work is expected to begin shortly, and the project is slated for completion by 2027.

    Meraas’ latest project contract awards in Dubai are backed by heightened real estate activity in the UAE’s construction market. Schemes worth over $323bn are in the execution or planning stages, according to UK analytics firm GlobalData.

    The company forecasts that the output of the UAE’s construction sector will grow by 4.2% in real terms in 2025, supported by developments in infrastructure, energy and utilities, as well as residential construction projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15158561/main.jpg
    Yasir Iqbal
  • December deadline for Riyadh airport fourth runway

    26 November 2025

     

    King Salman International Airport Development Company (KSIADC) has allowed firms until 3 December to bid for the design-and-build contract for the fourth runway at King Salman International airport (KSIA) in Riyadh.

    The tender was first floated on 17 April. The previous bid submission deadline was 28 October.

    It is understood that the third and fourth runways will add to the two existing runways at Riyadh’s King Khalid International airport, which will eventually become part of KSIA.

    KSIADC, which is backed by Saudi Arabia’s Public Investment Fund, prequalified firms in September last year for the main engineering, procurement and construction packages; early and enabling works; specialist systems and integration; specialist systems, materials and equipment; engineering and design; professional services; health, safety, security, environment and wellbeing services; modular installation and prefabrication; local content; and environmental, social, governance and other services.

    The entire scheme is divided into eight assets. These are:

    • Iconic Terminal
    • Terminal 6
    • Private aviation terminal 
    • Central runway and temporary apron
    • Hangars
    • Landside transport
    • Cargo buildings
    • Real estate

    In August last year, KSIADC confirmed it had signed up several architectural and design firms for the various elements of the project.

    US-based firm Bechtel Corporation will manage the delivery of three new terminals, including the terminal for commercial carriers, Terminal 6 for low-cost carriers and a new private aviation terminal with hangars.

    Parsons, also of the US, was chosen as the delivery partner for two packages. One covers the airside infrastructure, including the runways, taxiways, air traffic control towers, fuel farms and fire stations. The other involves the infrastructure connecting the airport to the rest of the city, including utilities and roads.

    UK-based Foster+Partners will design the airport’s masterplan, including the terminals, six runways and a multi-asset real estate area.

    US-based engineering firm Jacobs will provide specialist consultancy services for the masterplan and the design of the new runways.

    UK-based engineering firm Mace was appointed as the project’s delivery partner and local firm Nera was awarded the airspace design consultancy contract.

    Project scale

    The 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.

    If the project is completed on time in 2030, it will become the world’s largest operating airport in terms of passenger capacity, according to UK analytics firm GlobalData.

    The airport aims to accommodate up to 120 million passengers by 2030 and 185 million by 2050. The goal for cargo is to process 3.5 million tonnes a year by 2050.

    Saudi Arabia plans to invest $100bn in its aviation sector. Riyadh’s Saudi Aviation Strategy, announced by the General Authority of Civil Aviation (Gaca), 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/15158546/main.jpg
    Yasir Iqbal
  • Chinese contractor appointed for Algerian refinery project

    26 November 2025

    China’s Sinopec Guangzhou Engineering Company has signed a contract for the construction of a heavy naphtha catalytic processing unit at the Arzew refinery in Algeria.

    The contract was signed with the Algerian national oil and gas company Sonatrach.

    The contract uses the engineering, procurement, construction and operation model.

    Under the terms of the contract, Sinopec Guangzhou Engineering Company will handle the entire project lifecycle, from initial design to long-term management and operation.

    The project will be completed over 30 months, according to a statement from the Algerian Ministry of Hydrocarbons & Mines.

    The unit will have an annual capacity of 738,000 tonnes of heavy naphtha and will enable the refinery to increase gasoline production from 550,000 tonnes to 1.2 million tonnes a year.

    Algeria’s Ministry of Hydrocarbons & Mines said this represented “a significant step” that will strengthen the national capacity for gasoline production and help meet demand across various regions, particularly in the west and southwest of the country.

    Sinopec Guangzhou Engineering Company is a subsidiary of China Petroleum & Chemical Corporation (Sinopec), which is listed on stock exchanges in Hong Kong, Shanghai and New York.

    The project is part of Sonatrach’s wider programme to modernise and expand national refining capacities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15157814/main.jpg
    Wil Crisp