Saudi Arabia and Egypt to set up $16bn fund

10 April 2016

The two countries signed a host of other economic and investment deals

Egypt and Saudi Arabia have signed several investment and economic infrastructure development deals, including setting up a SR60bn ($16bn) investment fund to help revive Egypt’s ailing economy.

The Saudi-Egyptian Investment Fund is being established between the kingdom’s Public Investment Fund (PIF) and the entities belonging to it and the government of Egypt and its related entities, news agency Reuters cited the Egyptian state TV as saying.

The signing of the agreements took place in Egypt’s Abdeen palace in presence of President Abdel Fattah al-Sisi and Saudi Arabia’s King Salman bin Abdulaziz al-Saud, during a four-day visit to Egypt.

Egypt, the most populous Arab nation, has struggled since the 2011 popular uprising ousted former President Hosni Mubarak. The political upheaval has hurt the country’s economy and drove away foreign investors and tourists, the main sources of foreign currency for Egypt.

Among the other economic pacts, a memorandum of understanding (MoU) was also signed between the PIF and the Egyptian International Cooperation Ministry to establish an economic free zone in the Sinai area.

The two Arab nations have also signed agreements to develop $2.2bn electricity plant with a generation capacity of 2,250MW, set up agriculture complexes in Sinai and develop a canal to transfer water, Reuters cited a statement from the presidency.

A company has also been set up to develop 6 square kilometres of the industrial zone around Egypt’s Suez Canal worth $3.3bn, according to the statement, which did not give further details.

Saudi Arabia, the biggest regional economy, along with the other Gulf peers including the UAE, have injected billions of dollars, including grants, into Egypt’s since President Mohamed Mursi’s government was toppled in 2013. Saudi Arabia in particular has been a strong supporter of Egypt’s current government and, in March, the kingdom made significant deposits to help boost the Egyptian economy.

In early 2015, $6bn in long-term deposits from Saudi Arabia, the UAE and Kuwait boosted the North African country’s net international reserves. The three GCC countries pledged a further $6.5bn in aid to Egypt, and there are reports they have transferred higher levels without fanfare.

The investment agreement are part of a change in strategy from Saudi Arabia to focus more on financial support that will be beneficial for both Saudi Arabia and Egypt.

Some of the other projects announced on 9 April include private sector investments.

In early April, the deputy head of the Saudi-Egyptian Business Council told Reuters that Saudi businessmen are investing about $4bn in projects in Egypt and have already deposited 10 per cent of that sum into Egyptian banks.

On 8 April, King Salman announced that a bridge connecting Egypt and Saudi Arabia would be built across the Red Sea. Egypt also signed development agreements with Saudi Arabia worth $590m, according to Egyptian International Cooperation Minister Sahar Nasr.

She said the agreements, signed with the Saudi finance minister, covered development in the Sinai Peninsula, agriculture, housing and a university.

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