Talks between Saudi Arabia and Egypt over the purchase of Cairo-based United Bank have stalled over a disagreement about how to value the multi-million-dollar transaction, in a stumbling block as the government works to raise sorely-needed funding.
(Bloomberg) —
Talks between Saudi Arabia and Egypt over the purchase of Cairo-based United Bank have stalled over a disagreement about how to value the multi-million-dollar transaction, in a stumbling block as the government works to raise sorely-needed funding.
Discussions over the state-owned lender have faltered over how to account for the plunging value of the Egyptian pound, people familiar with the situation said. They asked not to be identified as the matter is private.
Saudi Arabia’s sovereign Public Investment Fund started negotiations with Egyptian authorities about buying the bank last year, part of the kingdom’s $10 billion pledge to help shore up the finances of the Middle East’s most populous nation. The deal could be worth as much as $600 million, Bloomberg reported at the time.
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The PIF wanted to value United Bank in Egypt’s pound with the dollar amount determined at the time of the transaction, while the central bank preferred a dollar-based valuation from the start, the people said. Egypt has devalued the pound three times in about a year, making it the world’s third-worst performing currency over the past 12 months.
United Bank, which was established in 2006, has 65 branches nationwide and more than 200 ATMs, according to its website.
The PIF declined to comment. Officials at Egypt’s central bank weren’t immediately available to comment.
The economic ripple effects of Russia’s invasion of Ukraine have hit the Egyptian economy particularly hard, triggering major food and fuel-price increases and cutting off sources of vital tourism revenues. Egypt is facing its worst foreign-currency crunch in years, and this month revived a plan to sell stakes in a number of state-run companies to raise cash.
One of the world’s largest wheat importers, Egypt has looked to secure financial support from Gulf Arab allies like Saudi Arabia and reached a $3 billion agreement with the International Monetary Fund. The IMF has described investments from energy-rich countries as “a critical part of the program’s financing strategy.”
Saudi Arabia deposited $5 billion in Egypt’s central bank last year and the PIF started a company to invest in swathes of the country’s economy, with sectors ranging from infrastructure and real estate to pharmaceuticals. But so far, only $1.3 billion of investments pledged by the kingdom have come to fruition, when the PIF unit acquired state-owned stakes in four Egyptian publicly listed companies.
Saudi Arabia, which has been a critical ally and financial backer of President Abdel-Fattah El-Sisi, has said it wants to continue to invest in Egypt. But its finance minister said in Davos last month that it’s changing the way it offers financial help to countries, expecting reforms in exchange for cash.
Read More: Saudi Arabia Says Days of Unconditional Foreign Aid Are Now Over
Earlier this month, Sisi warned against attempts to stoke regional strife, in what appeared to be a reference to social media reports that Riyadh was frustrated with the process of his country’s economic revival.
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