Positive messages

Gamal Essam El-Din , Wednesday 6 Apr 2022

GCC countries help Egypt mitigate the financial impacts of the war in Ukraine.

Positive messages
Al-Sisi with Bin Zayed

On 30 March, Saudi Press Agency (SPA) reported that King Salman bin Abdel-Aziz and Crown Prince Mohamed bin Salman had ordered that $5 billion be deposited with the Central Bank of Egypt (CBE).

On the same day, Essam bin Said, minister of Saudi Arabia’s Shura Council affairs, said Riyadh would also move to boost investments in Egypt. “Egypt is a core partner for us which is why we are taking urgent measures to inject $10 billion in investments in Egypt via cooperation between the sovereign funds of both countries.”

The $5 billion deposit pushes Saudi deposits in the CBE to $10.3 billion, according to Saudi Arabia’s Ambassador to Egypt Osama Al-Naqli.

Saudi Arabia deposited $5.3 billion with the CBE in 2016, following the first major devaluation of the Egyptian pound.

Al-Naqli says the Saudi Sovereign Fund has been issued with instructions to place “Egypt on top of countries receiving Saudi investments, especially in the agricultural, real estate, and healthcare sectors.”

President Abdel-Fattah Al-Sisi’s close relationship with the leaders of Saudi Arabia and other GCC countries always helps serve Egypt’s economic interests, says Yosri Al-Moghazi, chairman of the House of Representatives’ Committee of Arab Affairs.

Al-Moghazi told Al-Ahram Weekly that the Saudi financial initiatives followed the two-day visit President Al-Sisi’s paid to Saudi Arabia early in March. Later the same month, on 26 March, President Al-Sisi called Crown Prince Mohamed bin Salman to express Egypt’s solidarity with Saudi Arabia following Yemeni Houthi rebel attacks on vital facilities in the port city of Jeddah. Bin Salman subsequently hailed Egypt’s central role in supporting the security and stability of Arab Gulf countries against foreign threats and attacks.

Tayseer Matar, chairman of the Eradet Geel (the Will of a Generation) Party, and a member of the Senate’s Financial and Economic Affairs Committee, told the Weekly that the Saudi deposit, and announcement of new Saudi investments, had helped bolster the Egyptian pound against the US dollar.

During an exceptional meeting on 21 March the CBE’s monetary policy committee decided to raise interest rates and devalue the Egyptian pound against the US dollar by around 15 per cent in a bid to contain inflationary pressures caused by the war in Ukraine.

Following the $5 billion deposit the pound gained five piastres of its value against the dollar.

On 22 March Abu Dhabi’s sovereign wealth fund (ADQ) announced that it would spend $2 billion to acquire stakes in state-owned Egyptian businesses. Bloomberg reported that ADQ, a long-term investor in Egypt, planned to buy an 18 per cent stake in the CIB, Egypt’s largest listed bank, along with stakes in four other listed companies, including e-payment platform Fawry. In 2021, ADQ acquired the Egyptian pharmaceutical Amoun for $740 million and bought Egypt’s real estate developer SODIC for $388 million.

Matar says the Saudi investments and the ADQ deal sends a message to foreign investors that Egypt remains an attractive investment destination despite the war in Ukraine. “It also sends the message that the GCC’s wealthiest economies — Saudi Arabia and the UAE — will stand by Egypt and offset the negative effects of the war in Ukraine on its economy,” he said.

Al-Moghazi noted that ADQ’s decision came on the same day President Al-Sisi met with Abu Dhabi Crown Prince Mohamed bin Zayed in Sharm El-Sheikh. An official statement said the two leaders discussed economic and investment cooperation between Egypt and the UAE, the bolstering of global energy security, and market stability.

Qatar — Egypt’s former arch-enemy — will also invest $5 billion in investments in the Egyptian market. The surprise decision, says Al-Moghazi, “reflects the open-minded foreign policies adopted under the orders of President Al-Sisi”.

Al-Moghazi expects “the relationship between Cairo and Doha will continue to warm.”

On 28 March, Foreign Minister Sameh Shoukri and his Qatari counterpart Mohamed bin Abdel-Rahman Al-Thani held talks in Cairo. Abdel-Rahman Al-Thani, who has led Doha’s normalising of ties with Egypt since January 2021, said the Egyptian-Qatari relationship had “passed through a difficult stage which was marred with tension, and now we have open hearts to do everything necessary to serve the interests of our two countries and peoples.”

Following meetings with President Al-Sisi and Prime Minister Mustafa Madbouli on 29 March, Abdel-Rahman Al-Thani issued a press release saying: “In the coming stage Egypt and Qatar aim to expand areas of economic cooperation through partnership, and we agreed on investments and partnerships totalling $5 billion.”

The release also revealed that a joint higher committee headed by the foreign ministers of both countries would be formed to coordinate economic and political relations.

According to the Observatory of Economic Complexity (OEC), a US-based international trade data forum, years of tense relations significantly slowed trade ties between Egypt and Qatar. “Between 2015 and 2020, Egyptian exports to Qatar dropped from $408 million to $2.05 million, and Qatari exports to Egypt fell from $823 million in 2015 to just $24.2 million in 2020.”

While there are few details of Qatar’s planned $5 billion in investments, Minister of Economic Development and Planning Hala Al-Said told Bloomberg that “the Qatar Investment Authority — the country’s sovereign wealth fund — would acquire assets through Egypt’s privatisation programme.”

On 31 March, Finance Minister Mohamed Maait held talks in Cairo with his Qatari counterpart Ali bin Ahmed Al-Qawari. Maait said Egypt is keen that Qatari investments make use of the country’s ambitious privatisation programme and development projects, while Al-Qawari said he agreed with Maait that the two countries should begin by signing a technical protocol between their ministries of finance updating an earlier agreement banning double taxation.

*A version of this article appears in print in the 7 April, 2022 edition of Al-Ahram Weekly.

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