In a new strategic move, the Egyptian government is preparing to announce within days a major investment deal in the Ras Shukheir area on the Red Sea, with the participation of a Gulf sovereign wealth fund. Ahmad Abdel Rahman reports from Egypt.
According to a senior government source, the deal, the first in a series of projects spanning an area of 174 million square metres, will be supported by a local sovereign bond issuance, the proceeds of which will be allocated entirely to address the crisis of the expanding public debt.
The unnamed source described the deal as a starting point for a new investment model, inspired by the Ras Al-Hikma agreement with the Abu Dhabi sovereign wealth fund, previously known as Abu Dhabi Developmental Holding Company, a sovereign wealth fund in Abu Dhabi focused on infrastructure.(ADQ). However, the difference is that the Ras Shukheir land has been officially allocated to the Ministry of Finance by presidential decree, with the aim of financing public debt through bonds, without selling or disposing of assets.
The Ministry of Finance intends to invite Gulf sovereign wealth funds and investment institutions to subscribe to these bonds, which will be linked to specific projects in Ras Shukheir, within a new financing framework in line with the Gulf Cooperation Council (GCC) countries' wants.
Economic expert Medhat Nafie said that this model allows the state to exploit assets without transferring ownership, noting that bonds securitise asset revenues rather than selling them, similar to revenue bonds.
The new project is expected to include investments in renewable energy, green hydrogen, tourism, and heavy industries, enhancing the region's attractiveness as a regional investment hub.
Although the identity of the Gulf fund has not been officially revealed, recent government visits to a number of Gulf countries have seen them convert their deposits at the Central Bank of Egypt into investments. This is in addition to a Qatari pledge to invest USD7.5 billion in Egypt, in addition to a $4 billion Kuwaiti deposit, half of which is due next September.
Ras Shukheir is receiving increased attention, with the government approving the establishment of a green industrial zone for petrochemicals and green hydrogen. These will be along with a massive 550-megawatt wind energy project being implemented by Saudi Arabia's ACWA Power and Egypt's Hassan Allam, Egypt's leading corporation operating across engineering and construction, investment and development.
The government hopes this model will contribute to stimulating the local capital market and creating a secondary market for sovereign bonds. This will enhance the flexibility of the debt strategy and attract foreign direct investment, which is targeted to reach $42 billion in the next fiscal year and $55 billion by 2028/2029.
Former Egyptian Parliament member Mohamed Fouad said that resorting to issuing asset-backed debt instruments is not new, neither in Egypt nor in the global financial context. Fouad explained that the 2025-2026 draft budget already includes a clause to improve the efficiency of asset management, especially underutilized ones.
Fouad added: "Bonds are ultimately a financial instrument for converting a state- owned asset or future cash flows into securities. This is done in exchange for the right to use them in the market, through companies designated for this purpose, known as SPVs (special purpose vehicles)."
Fouad emphasised: "The point raised here is that bonds do not eliminate the burden, but rather changes accounting, as it (a SPV) is not recorded as a debt, but rather as an expense. Therefore, if the state issues a sukuk worth, say, EGP 4 billion, and the amount is used to repay debts, the debt will decrease by that amount, but the sukuk itself will not be recorded as a debt, but rather as an expense, and thus the burden remains." (A sukuk is a Sharia-compliant bond)
Fouad explained that the asset is not transferred to the bond holder, but rather to the SPV, that issues the bonds. He said: "The bond holder only owns the asset in the event of default, at which point the asset may be liquidated, but they do not have a direct legal right to the asset."
He emphasised: "The idea here is that the asset is not transferred to the investor, but is financed through a private company. It is not considered a burden within the public debt, but rather a rental or financing expense,"
He explained that the challenge lies in the fact that "this asset is not income- generating, and therefore the Ministry of Finance remains responsible for servicing these bonds that are without cash flows . This means that the burden is not resolved, but rather shifted from one item to another.