CAIRO - 23 February 2024: The American Investment Bank, Goldman Sachs, said in a report released on Friday that the dollar liquidity provided by the strategic partnership between Egypt and the United Arab Emirates (UAE) in the Ras El Hikma project will be sufficient to cover the financing gap in Egypt over the next four years, as expected in the bank's analysis of financing needs.
Earlier on Friday, Egypt signed a deal with the Abu Dhabi Developmental Holding Company PJSC (ADQ) - the sovereign wealth fund of the Emirate of Abu Dhabi - to develop the Ras Al-Hikma city, with total investments of $35 billion whose entitlements will be earned within two months, and the state will have a 35 percent share of the project's profits.
The report explained that the size of this investment is much larger than expected, and the timing of this liquidity entry is very close if the financing goes as planned.
According to the report, the inflow of foreign currencies is expected to provide the Egyptian central bank with sufficient liquidity to settle the accumulation of foreign currencies and settle the foreign exchange market in the future.
The bank expected that within days or weeks, some reduction in the official exchange rate could be achieved.
"We believe that the size of any reduction in the currency's value is likely to be relatively modest compared to current market rates, given the foreign exchange resources that will be available to Egypt," according to the report.
The report pointed to the expectation of a sharp drop in demand for foreign currencies in the Egyptian economy against the backdrop of the announced investment.
"We believe that this announcement encourages the Egyptian pound and provides an opportunity for Egypt to regain liquidity in both directions in the foreign exchange market in the coming days and weeks," Goldman Sachs Bank said.
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