Egypt plans to generate more capital into its foreign reserves by selling state assets to strategic private investors.
Plans to sell state assets are not new to Egypt. These plans have been on the drawing board since 2016. But last May, Egypt arranged to privatize some sectors of its economy to attract- at least- $40 billion in investment in four years as the country battled surging inflation. Egyptian Prime Minister Moustafa Madbouly stated then that the nation was racing to increase private investment in key public sectors from 30% to 65%.
Egypt’s idea of selling its assets to private investors, particularly strategic investors from gulf nations, isn’t as bad a move as it may appear to some. This North African nation is impoverished and the government needs to run the economy in the interest of its people. On the other hand, oil-rich nations like Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates would seize the investment window to diversify their economy in investment in foreign assets.
Since the early years of President al Sisi’s regime, his government has dramatically gained from the benevolence of Gulf countries including Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Bahrain, and Qatar. Gulf countries have consistently come to Cairo’s rescue. In April 2022, three Gulf Cooperation Council countries pledged around $22 billion to Egypt. The Saudis deposited $5 billion into Egypt’s central bank, while the Emiratis and Qataris made investment deals.
Egypt has been facing financial difficulties for close to a decade. To sustains its economy, the country has raised capital from international lenders like the IMF and Gulf countries. Last year, economic pressures, heightened by the Russian-Ukraine war, made it approach the IMF for a $3 billion loan. One of the criteria for that loan was for Egypt to devalue its currency. Which it did.
Although currency devaluation has made the country an attractive investment destination for investors, the Egyptian pound lost its value by over 50%. The situation is hurting businesses and people. Most people can no longer afford to acquire basic living essentials. More so, the IMF forecasted last year that the country would be having a $17 billion capital deficit between then and 2026.
Thus, the government is moving to attract private investments in several companies “either to widen the participation of Egyptian citizens in public ownership or to bring in strategic investors,” as described by Prime Minister Moustafa Madbouly. Egypt’s latest investment offering in state assets provides an avenue for Cairo to inject capital into its sick economy as well as allows these Gulf nations to diversify their economy via foreign asset investments.
Reuters reported some planned sales as shares in three prominent banks, Banque du Caire, United Bank of Egypt and Arab African International Bank. More so, investment opportunities will be open in the insurance, electricity and energy sectors, as well as hotels, manufacturing and agricultural sectors.