The EBRD has an important role to play in Egypt’s strategic partnership with the EU: On the heels of the European Commission President Ursula von der Leyen’s visit to Cairo last week, which was accompanied by various European heads of state to ink a joint strategic and comprehensive partnership with Egypt, Enterprise sat down with the European Bank for Reconstruction and Development’s (EBRD) Head of Egypt Khalid Hamza (LinkedIn) to find out more about the new partnership and the incoming EUR 7.4 bn.

Remember- A lot has changed during the month, with businesses, policymakers, and international lenders like the EBRD assessing the impact of a new post-float normal. Huge inflows of foreign currency have started entering Egypt’s coffers following the ADQ’s landmark USD 35 bn Ras El Hekma agreement — the largest ever direct investment in Egypt. Soon after, the central bank moved to float the currency and hike interest rates by 600 bps to tackle an FX crunch that was facing the country. In addition, over USD 22 bn funding from the IMF, EU, and World Bank was greenlit.

For starters, the bank is going to help unlock USD 1 bn to support the partnership’s economic stability pillar: “If we speak about the economic macro stability, here we’re coordinating with other [international financial institutions] and with the IMF on some of the policy issues that Egypt could adopt to be able to release the Resilience and Sustainability Facility,” Hamza told Enterprise. The IMF facility unlocks about USD 1 bn to facilitate Egypt’s energy transition.

The EBRD is going to play an important role in trade and investment — especially for the private sector — under the EU-Egypt partnership, Hamza told us, saying that almost 80% of the bank’s activity is with the private sector and that the last year saw 96% go to the private sector.

The bank aims to double down on infrastructure investment to tackle the migration crisis: Migration “puts a lot of pressure on Egyptian infrastructure, both hard and soft infrastructure,” Hamza explained, citing that the partnership seeks to support Egypt in hosting refugees and migrants and continuing to clamp down on irregular migration. “We’re very well geared to address this and we’ve done this before and in other areas in the region by addressing those issues with investments in infrastructure.”

Fresh funds? While the EUR 7.4 bn package of grants and loans includes pledges that were previously announced, funds like the EUR 35 mn allocated in 2022 to Egypt’s Nexus of Water, Food, and Energy have not been utilized yet and in this sense can be considered “new money,” Hamza explained.

But what does the EU get out of the partnership? “There’s the political dimension, there’s the security dimension, and there’s the economic dimension,” Hamza said. In addition to being important to regional stability and an important factor in limiting unregulated migration flows into Europe, “it’s also very important because it has a huge potential to become a key supplier of renewable energy to its European neighbors.”

How will the political and security dimensions play out? “Politics is best left to the politicians and security is best left for those who work in security,” Hamza told us.

The partnership’s education and research cooperation pillar will also get some EBRD financial support and know-how: Skills development “is something that we play a big role in. We’ve worked in Egypt on trying to help with the establishment of a number of sector skills,” Hamza told us. “We’ve also supported the private sector establishing technical skills…We’ve actually financed technical assistance to upgrade and build capacity on the staff level.”

The float doesn’t just affect the valuation of projects, it enables them, Hamza told us, explaining that mergers and acquisitions and the state privatization program faced stagnation, because it was difficult to determine the true value of a company amid multip exchange rates. Progress resumed, however, once the exchange rate was unified, he added.

Is the EU private sector gearing up to invest in Egypt following the recent reforms? “What happened with the IMF and the positive news that’s happening at the moment is certainly raising curiosity on the European side.” Hamza said. On top of this, the upcoming EU-Egypt Investment Conference “will shed a lot of light [on investments in Egypt] and also on the importance and strategic location of Egypt to Europe [especially in light of CBAM].”

Remember: The EU is gearing up to fully implement the Carbon Border Adjustment Mechanism — more commonly known by its acronym CBAM — in 2026, which will require importers to purchase certificates according to the associated carbon emissions, effectively introducing a tax on high-emission goods from non-European countries such as Egypt.

What the EBRD wants to see going forward: The EBRD is looking forward to seeing more private sector involvement in the economy, more manufacturing endeavors and more exports, Hamza said.

“I think that European companies are underutilizing the potential of Egypt,” Hamza said, adding that “Egypt has cheap labor, is strategically located very close to Europe, and is working hard on greening its supply chain.” He also said that “there’s a lot of incentives and positives when looking at Egypt as a manufacturing hub or nearshoring potential.”

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