Egypt has raised $800 million from selling a stake in seven of its most iconic hotels to a local real estate developer, as part of a wider plan to privatize state-owned assets and boost foreign currency reserves, Prime Minister Mostafa Madbouly said on Wednesday.
The deal, which was signed by the country’s sovereign wealth fund and Talaat Moustafa Group (TMG), one of Egypt’s largest property developers, gives TMG a 39% stake in the hotels, with the option to increase it to 51%, according to a cabinet statement.
The hotels, some of which date back to the late 19th or early 20th centuries, include the Cataract in Aswan, the Winter Palace in Luxor, the Mena House in Cairo, and the Cecil in Alexandria. They are among Egypt’s most prestigious and historic hospitality venues, attracting celebrities, royals, and dignitaries over the years.
Madbouly said the revenues from the stake sales, which have reached $5.6 billion so far, would help the government cope with a long-running shortage of foreign currency and a rising debt burden. He did not provide a breakdown of the revenues or the sources of financing.
The privatization program, which aims to sell stakes in about 50 companies across various sectors, has faced several delays and challenges since it was launched in 2018. The government has said it hopes to raise up to $7.2 billion from the program, which also includes listing some state-owned enterprises on the stock exchange.
The program is seen as a key component of Egypt’s economic reform agenda, which has been supported by a $3 billion loan from the International Monetary Fund (IMF) under a 46-month Extended Fund Facility approved in December 2022.
The IMF-backed reforms, which include a flexible exchange rate regime, monetary policy aimed at reducing inflation, fiscal consolidation, and structural measures to improve governance and competitiveness, have helped Egypt restore macroeconomic stability and investor confidence after years of political and social turmoil following the 2011 uprising.
However, the reforms have also come at a high social cost, as millions of Egyptians have been pushed into poverty and unemployment, while inflation has soared to double-digit levels. The government has tried to mitigate the impact of the reforms on the poor and vulnerable by expanding social safety nets, such as cash transfers, food subsidies, and pensions.
Egypt’s tourism sector, which is a vital source of foreign currency and jobs, has also been severely affected by the COVID-19 pandemic and its aftermath. The sector, which accounts for about 12% of the country’s gross domestic product (GDP), saw a sharp decline in tourist arrivals and revenues in 2020 and 2021, as travel restrictions and lockdowns disrupted global travel.
The government has taken several measures to revive the sector, such as easing visa requirements, offering discounts on flights and hotels, and launching new attractions, such as the Grand Egyptian Museum and the Kebash Road in Luxor. The sector has shown signs of recovery in 2022, as some key markets, such as the UK and Russia, lifted their travel bans on Egypt.
The sale of the historic hotels is expected to further boost the sector, as TMG plans to invest in upgrading and expanding the properties, as well as attracting international investors to its hospitality company, ICON, which will manage the hotels.
Hisham Talaat Mostafa, CEO of TMG, told Reuters that ICON would raise its capital by $882.5 million, of which $800 million would come from an unnamed international investor. He said the details of the deal would be announced in the next few weeks.
The deal is also seen as a positive sign for Egypt’s business environment, as it demonstrates the government’s commitment to reducing the state’s role in the economy and creating a level playing field for the private sector.
Egypt, which has a population of over 105 million, is the largest and most diversified economy in the Arab world, with a GDP of about $362 billion in 2022, according to the IMF. The fund projects the economy to grow by 4.2% in 2023 and 3.6% in 2024, while inflation is expected to ease to 23.5% and 32.2%, respectively.
Source: Reuters
