The Kuwait Fund for Arab Economic Development (KFAED) has signed a KD29m ($96m) loan with Egypt for five desalination plants in the South Sinai governorate.

The tenor is 25 years, including five years grace, and the total interest rate is 2 per cent.

The total cost of the desalination plants is estimated at £E1bn ($113m). The loan aims to cover most of the foreign exchange requirements for the project, about 88 per cent of the total. Egypt is currently suffering from a shortage of foreign currency.

The El-Tor plant will have a production capacity of 20,000 cubic metres aday (cm/d). The other four facilities, in Ras Sidr, Abu Zenima, Dahab and Nuwaiba, will each have a capacity of 10,000 cm/d.

The scheme also includes electricity connection works, eight pumping stations and water transmission and distribution networks. The networks comprise 42 kilometres of 500- and 800-millimetre pipelines to storage tanks, as well as 183km of pipelines between 200 and 500mm to residential areas.

Work on the project is expected to start in early 2017 and be completed by the end of 2019.

The scheme is part of Egypt’s plan to develop the Sinai Peninsula. Gulf investors have agreed to invest in the region, led by Saudi Arabia with $1.5bn.