Egypt and the United Arab Emirates (UAE) have inked a landmark investment partnership agreement aimed at developing the Ras al-Hikma peninsula, located west of Alexandria, in what is being hailed as one of the largest deals of its kind.

Prime Minister Mostafa Madbouly announced during a news conference on Friday that the UAE plans to inject $35 billion in foreign direct investment into Egypt over the next two months.

Madbouly emphasized that this significant investment would play a crucial role in addressing Egypt's hard currency crunch, which has posed challenges to servicing its substantial foreign debt. Additionally, it is expected to help unify Egypt's exchange rates, ending the discrepancy between official and black market rates for the Egyptian pound.

The investment initiative will see $24 billion allocated to the development of the Ras al-Hikma area on the Mediterranean coast, with the remaining $11 billion earmarked for deposits to support prime projects across Egypt, fostering economic growth and development.

Under the terms of the agreement, the initial tranche of $15 billion will be injected into Egypt within the coming week, followed by a second tranche of $20 billion over the subsequent two months.

The Ras al-Hikma project envisions the creation of a comprehensive resort city complete with an airport, to be managed by the UAE.

Egypt's economy, heavily reliant on imports and characterized by infrastructure mega-projects, has faced significant challenges in recent times. The COVID-19 pandemic dealt a blow to its vital tourism sector, while the Ukraine conflict led to increased costs of wheat and other imports. Furthermore, recent attacks on Red Sea shipping by Yemen's Houthis have impacted Suez Canal fees.

Amidst these challenges, remittances from overseas Egyptian workers, a key source of foreign currency, have declined substantially, exacerbating Egypt's debt burden.

The IMF has provided a $3 billion loan facility to Egypt but has urged the implementation of austerity measures and economic reforms. However, delays in carrying out these reforms have hindered the disbursement of loan tranches and program reviews.

The currency crunch has also eroded confidence among Western investors, with JP Morgan excluding Egypt from its index of government bonds and Moody's lowering its outlook on Egyptian bonds from "stable" to "negative." (ILKHA)