It is one of the few undeveloped spots remaining on the Mediterranean coast. There are white sand beaches, a few olive groves and an ageing 1940s holiday home built by the deposed King Farouk. So far, there is nothing to suggest that, within 30 years, the tranquil Egyptian peninsula of Ras el-Hekma will host a major new city.
On 23 February, the Abu Dhabi sovereign wealth fund ADQ announced plans to develop Ras el-Hekma as part of a deal worth $35bn (£28bn) in investment and debt relief. According to the Egyptian government, the 170 sq km city will include a marina, an airport and capacity for 8 million tourists a year. It is the largest foreign direct investment deal in Egyptian history by some margin, with ADQ paying the government the equivalent of 7% of the UAE’s total GDP upfront, a year before it plans to break ground.
“Investments don’t happen like this,” says Mohamed Fouad, a financial consultant and former member of the Egyptian parliament. “This is a bailout.”
The deal was the first of a slew of proposed loans, grants and investments made to Egypt in the last month. Between the UAE, the IMF, the EU and the World Bank, Egypt has received $57bn in pledges to be disbursed over three years. Despite recent fears that Egypt’s growing debt crisis and rising inflation threaten the resilience of its economy, Egyptian bond markets have rallied since the announcements, and economists say the country has a real opportunity to address systemic economic problems.
But civil rights groups have criticised the deals, with Human Rights Watch warning that the money “rewards authoritarianism”.
The executive director of Democracy for the Arab World Now, Sarah Leah Whitson, urged “the IMF and the World Bank not to provide funding to governments like Egypt that are not responsible stewards of their country and their economy, and in fact are the primary beneficiaries of the corruption and mismanagement of the economy”.
The deals come amid increased concern for Egypt, particularly among western and Gulf governments after the outbreak of war in Gaza. “It’s all about relevance,” says Fouad. Fighting since 7 October has focused attention on the country, which has long been called “too big to fail”, but which Fouad believes had become less of a priority in Washington and elsewhere in recent years.
Fouad says that Egypt’s partners worried that the economic impact from the war in Gaza could put the country of 114 million – already struggling with an existing economic crisis – in a “perilous situation” at a sensitive time.
“The main turning point was Ras el-Hekma,” says Ramona Moubarak, head of Middle East and North Africa country risk at Fitch Solutions. The size of the ADQ deal reassured the government enough to float the Egyptian pound on 6 March.
The future of the currency, pegged to the US dollar, was a longstanding disagreement between Egypt and the IMF. Hours after the float, the fund signed off on a $8bn loan.
The EU followed suit two weeks later with Ursula von der Leyen, the president of the European Commission, leading a delegation of leaders from five European countries to Cairo. They presented a €7.4bn (£6.4m) package of loans, grants and investments that includes a €200m grant to tackle irregular migration. Days later, the World Bank presented a $6bn package.
The total pledged to Egypt amounts to almost $60bn. “That’s an economy,” says Moubarak.
In a press release the day its deal was announced, the IMF says that the policy reforms negotiated with Egypt, which include a move towards a flexible exchange-rate system, tightening of monetary policies, and support for the private sector, will “help preserve macroeconomic stability, restore confidence and allow Egypt to manage the challenges associated with recent external shocks”.
Timothy Kaldas, deputy director of the Tahrir Institite for Middle East Policy, says the government of Abdel Fattah al-Sisi is “very capable of squandering [the money] if they don’t act responsibly”.
Since coming to power in 2014, Sisi has prioritised the construction of multibillion-dollar projects, including an extension to the Suez Canal and 38 so-called “smart cities” to be completed by 2050. These include his flagship project, the New Administrative Capital (NAC), a city east of Cairo, which features Africa’s tallest skyscrapers and a Ministry of Defence building seven times bigger than the Pentagon. The NAC alone is reckoned to cost about $58bn although exact numbers are shrouded in secrecy.
In response to rising budget pressures, the government announced in January that it would curb spending on big projects. The IMF has also made a reduction in infrastructure spending a key requirement of the loan.
But after the Ras el-Hekma announcement, the chairman of the Suez Canal Authority, Osama Rabie, announced earlier this month plans to build a 50-mile extension to the canal, slightly longer than the extension completed in 2015 at an estimated cost of $8bn.
“It reflects my initial worry on the day they announced the Ras el-Hekma project,” says Kaldas. “They finally realised what they were doing for the last 10 years was unsustainable and needed to change.” Now, Kaldas is concerned “that all that is going to evaporate and they’re going to go back to their old ways until the next even bigger crisis”.
Among Sisi’s state construction projects are dozens of new prisons. Sixty detention centres have been built in the past 11 years according to Cairo-based Arabic Network for Human Rights Information, one of Egypt’s last civil rights organisations which itself folded in 2022 under government pressure. The estimated tens of thousands of political prisoners jailed under Sisi include the British-Egyptian writer Alaa Abd el-Fattah who, after spending a long period in pre-trial detention, was sentenced to five years in 2021 for spreading “false news undermining national security” after sharing a retweet about torture.
“There is no space whatsoever for dissent,” says associate director for EU advocacy at Human Rights Watch, Claudio Francavilla. “The military controls the government, there is no free media, and civil society is almost wiped out.” By extending billions of credit to Egypt, Francavilla says, the EU and others “are strengthening the oppression in this country”.
The foreign affairs ministry did not respond to requests for comment.
• This article was amended on 9 April 2024 to amend Claudio Francavilla’s job title
