Egypt’s dollar bonds surged and its pound strengthened in street trading, as a landmark $35 billion investment deal with the United Arab Emirates stoked optimism that the cash-strapped nation will ride out its economic crisis.
Egyptian debt due in 2032 and 2033 each rose more than 5 cents on the dollar — their biggest-ever jump — after the agreement raised the likelihood that a much-awaited currency devaluation is imminent and will be less dramatic than recent black-market rates suggested. The country’s notes had the largest gains among emerging-market and frontier debt worldwide on Monday.
On the parallel market, the pound has gained around 20% to about 50 per dollar, according to multiple traders and importers Bloomberg spoke with. That’s narrowed the gap but is still considerably weaker than the official one, which has held steady at about 30.9 per dollar for the past year as Egypt wrestles with a dire shortage of foreign currency.
The worst crisis in decades appeared to reach a turning point last week, when authorities signed a massive pact for the UAE to develop Ras El-Hekma, a prime area on Egypt’s Mediterranean coast. The government described it as the biggest investment in the country’s history.
The potential infusion of funds would give Egypt’s central bank the financial fire-power it needs to enact what would be its fourth devaluation since early 2022.
That move in turn would help Egypt seal a deal to increase its current $3 billion loan with the International Monetary Fund — little of which has been distributed — to a package of more than $10 billion that may bring in other partners.
While some of the UAE funds are expected in the coming weeks, not all of the monarchy’s previous investment pledges are proceeding according to plan.
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