A delegation from the Abu Dhabi Investment Authority (ADIA) will arrive in Cairo in the next few days to discuss investing in government debt worth EGP 15bn, a figure that may double in the future, according to a senior Egyptian government official.
The official added that the fund will be underwritten in bills and bonds, which would actualize foreign currency flow, along with regulating the local debt market and helping to bridge the government funding gap.
Foreigners leaving the debt market following the January 25 Revolution led to a collapse of foreign currency reserves after more than $11bn was transferred abroad.
The source said the UAE is expected to issue guarantees to the Egyptian General Petroleum Corporation (EGPC) by issuing bonds ranging between $2-3bn as a loan to pay back foreign partners.
Meanwhile, he added, the government received an offer from the National Bank of Abu Dhabi to purchase debts to foreign partners and resell them to Egypt in local currency, and the government is currently considering the deal.
The UAE funded a portion of Egypt’s petroleum needs after the ouster of former president Mohamed Moris in July 2013. Kuwait and Saudi Arabia also contributed, and the total amount of cash and in-kind support provided by the three nations amounted to more than $12bn, half of which formed a grant that will not be repaid.
The government says that it is experiencing a funding gap for the 2014/2015 fiscal year worth $18bn, even after the recently implemented austerity measures.
The UAE has signed a contract with two international bodies to offer investments to the Egyptian government and aid in the creation of an economic restructuring program. Egypt has moved in the direction of introducing reforms to the subsidy system in order to decrease the budget deficit.
It is noteworthy that Hamed bin Zayed chairs the ADIA, a sovereign wealth fund worth more than $600bn. It was founded by 1976 by surplus oil investments of the Emirate of Abu Dhabi in order to enhance the Emirate’s strategic wealth.
A high-level government delegation attended by the ministers of Finance, Planning, and Petroleum recently visited the UAE to secure Emirate participation in the Friends of Egypt Conference, which the government intends to convene before the end of the year to attract foreign investments.