25 August 2023; MEMO: Egypt hopes its imminent inclusion in the BRICS bloc of developing nations will help ease its shortage of foreign currency and attract new investment, but analysts say it may take time before any benefits appear, Reuters reports.
The bloc, which includes Brazil, Russia, India, China and South Africa, on Thursday invited Egypt and five other countries to join, and Egypt immediately welcomed the offer.
“I appreciate Egypt being invited to join BRICS and look forward to coordinating with the group to achieve its goals in supporting economic cooperation,” President Abdel-Fattah Al-Sisi said soon after being invited.
Egypt, over the past few years, has been mired in an economic crisis aggravated by the coronavirus pandemic and Russia’s invasion of Ukraine.
Its currency has fallen by half in 18 months, annual inflation surged to a record 36.5 per cent in July, and a borrowing spree over the last eight years has made external debt repayments increasingly onerous. The dollar crunch has forced it to defer payments for wheat imports.
“The group’s aim of reducing dollar transactions will lower the foreign currency pressure in Egypt,” the cabinet said in s statement on Thursday. Membership in the bloc’s New Development Bank (NDB), established by its members in 2015, will provide concessional funding for development, it added.
Egypt’s Supply Minister said in April it was discussing with China, India and Russia using their currencies for commodities, but no deal had been reached.
Monica Malik of ADCB said BRICS membership may eventually help Egypt attract more investment.
“It’s positive for Egypt to be included. Whilst in the near term the impact is expected to be limited, it could help strengthen its relationships with key EM (emerging market) economies.”
Charles Robertson, head of macro strategy at FIM Partners, said gaining access to cheap NDB funding would help Egypt and it made sense to keep close to China, a potential source of huge foreign direct investment (FDI) in Egyptian manufacturing.
“Egypt has two deep needs – FDI and a cheaper debt burden – and BRICS membership can help with both,” Robertson said.
The BRICS group on Thursday also invited Saudi Arabia, Iran, Ethiopia, Argentina and the United Arab Emirates to join.
“Whether it is Saudi and UAE injecting capital, or Egypt drawing on that capital, this Bank is a welcome addition to the global financial architecture,” Robertson added.
James Swanston of Capital Economics said the BRICS expansion was unlikely to have major economic effects in the near term, but that “the possible shift in geopolitical alignment could have longer-run implications for trade and economic growth”.
