The Egypt-EU Investment Conference 2024, which will be held on 29-30 June in Cairo, was agreed upon by the two sides as they raised their level of cooperation in March into a strategic and comprehensive partnership at the Egypt-EU Summit.
At the March summit, the EU pledged a financing package for Egypt worth $8 billion amid regional and international challenges faced by the country.
Harmgart tackled the bank’s forecast for the Egyptian economy included in its latest Regional Economic Prospects report, released in May, and how the EBRD addressed the importance of Egypt as an operations destination during the bank’s annual meetings in Armenia in May.
She also shed light on the repercussions of the war on Gaza and how it has affected the Egyptian economy.
Egypt led the EBRD's investments in the SEMED region in 2023 with new commitments to 16 projects totalling around €1.3 billion.
Egypt-EU Investment Conference
The event is expected to give more clarity on the $8 billion financing package the EU has committed to Egypt amid the repercussions of the regional tensions. It is also an opportunity for European investors to explore the priorities on the government’s agenda in terms of the investment opportunities they can tap, Harmgart told Ahram Online.
“The EBRD will be interested in continuing to blend its financing with EU financing announced for Egypt to make projects more affordable. For example, we already have a big transmission project in discussion with the Egyptian government that would be for electricity transmission connecting to the Gulf of Suez wind farms. This would benefit from some EU grants. We are in open discussions with the EU, trying to understand how much of the funding would go as budget support or to macro-fiscal support, and how much could go to projects in the energy and transport sectors particularly,” said Harmgart.
She also stressed that the EBRD is very supportive in terms of utilizing some of the announced finance to plans for the bank’s projects in the country.
“It is a big conference, and we really hope that there will be concrete milestones of how the $8 billion of the EU is going to be split between their different instruments, guaranteeing instruments budget support blending. We would be very happy to implement any programmes that they prioritize. So I hope that the energy transition and lower fee in particular is high on the agenda because we have a lot more. The next one would be a distribution control centre. We also look forward to announcing the green hydrogen strategy for Egypt during the conference,” Harmgart revealed.
During the Egyptian-European Summit last March, the EU announced a commitment of €7.4 billion ($8 billion) in financial and investment support package for Egypt for 2024-2027. The package includes €5 billion in concessional loans (macro-financial assistance), €1.8 billion of additional investments, under the Southern Neighbourhood Economic and Investment Plan, and €600 million in grants, including €200 million for migration management.
In this respect, Egypt’s Ministry of International Cooperation revealed that an agreement with the EU is expected for the disbursement of the first €1 billion tranche of the announced finance in 2024 as part of the €5 billion allocated for macroeconomic and budget support. It will feature soft financing terms, including extended repayment periods and favourable interest rates, while details of the associated structural reform policies will be announced during the conference.
Harmgart told Ahram Online that the EBRD paid visits to several GCC countries, including the UAE, Saudi Arabia, and Qatar to encourage investors there to invest in Egypt and to extend finances, if needed, that enable the companies there to enter the market.
“There is a high interest from these companies’ side to invest in Egypt, which is positive, and these companies understand the market already quite well,” according to Harmgart.
The conference will also be an opportunity for European businesspersons to see the changes made to the Egyptian economy over the past few years and that things are on the right track.
“The macro challenges in the country are decreasing, and this could be a good sign for European companies and investors that could encourage them to come to Egypt. So we are expecting two key outcomes to attract more EU investors to the Egyptian market and to give details on the $8 billion bailout financing,” Harmgart said.
European investors' view of Egypt
While there are already European investments in Egypt, she has not seen many newcomers in the last couple of years because of the macroeconomic situation in the country that was affected by the pandemic outbreak, the Russian-Ukrainian war, the global inflationary wave, and recently the tensions in Gaza, she said.
“Egypt has lots of potential that could be tapped by European investors, especially the renewables and infrastructure sectors. The conference will be an opportunity for them to see the economic situation of Egypt on the ground,” according to Harmgart.
EBRD’s forecast for Egypt’s economy
In its May report, the EBRD cut its projection for Egypt’s real GDP growth for 2024 to 3.9 percent, down 0.6 percent from its September forecast, lowering its forecasts for the current FY2023/2024, which ends on 30 June, by 1.8 percent to three percent.
Harmgart explained that EBRD had to downgrade its projections for the Egyptian economy because of the repercussions of the global and regional tensions, especially with the severe impacts of disruptions in the Red Sea that have negatively affected the revenues of Egypt’s Suez Canal.
Egypt has lost 60 percent of Suez Canal revenues since the eruption of the Israeli war on Gaza, according to the latest figures by the Egyptian Ministry of Finance. The Suez Canal is a key source of hard currency and a key contributor to the country’s GDP.
“Yet, we are more optimistic for 2025 for the real GDP growth to go up to 4.4 percent and four percent for the upcoming FY2024/2025, as remittances are recovering as well as the tourism sector’s performance,” according to Harmgart.
Egypt in EBRD’s 33rd annual meeting
EBRD held its 33rd annual meeting in Armenia in May, with Egypt being in the spotlight of discussions. During the meeting, Egypt’s Minister of International Cooperation Rania Al-Mashat was elected as the vice chair of the EBRD’s Board of Governors.
“Egypt plays an important role in many dimensions, being the largest country of the EBRD’s operations in the Southern and Eastern Mediterranean region. 2023 was also a record in terms of private sector investment, as 96 percent of what we did in Egypt was directed to the private sector. Also, the election of Minister Al-Mashat gives the country additional visibility among the EBRD’s country members”, Harmgart added.
She noted the EBRD’s latest annual meeting mainly focused on green projects in Egypt, particularly the solar power and wind projects as investment opportunities that also reflect the priorities on the Egyptian government’s agenda.
The projects that are implemented under Egypt’s Nexus of Water, Food, and Energy (NWFE) programme were also a point of focus, according to Harmgart, expecting these projects to be a key point of discussion during the EU-Egypt Investment Conference as well.
“We are mainly focused on green. So, the pipeline of solar and wind projects in the country is a focus for us,” Harmgart asserted.
Sectors to lead Egypt’s growth
According to Harmgart, exports, especially in industrial areas, small and medium-sized enterprises (SMEs), tourism, and green projects, mainly on hydrogen, have lots of potential to lead Egypt’s economic growth.
“Exports, especially industrial exports, have a huge potential with a very competitive business environment now. We are optimistic about the automotive investment in Egypt that could really drive its growth. I think a big one will remain tourism because this sector is not just a source of foreign currency revenues, but also a growth driver. Furthermore, exporting green hydrogen has the potential to drive the country’s economic growth over the medium term,” Harmgart said.
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