Egypt seeks to keep $5.4 billion Saudi deposit as regional wars bite

The Egyptian government is holding talks with Saudi authorities to reach an agreement to renew a $5.434 billion Saudi deposit at the Central Bank of Egypt, due for repayment in October, or convert it into direct investments instead of allowing it to leave Egypt when it falls due.

Economic sources told The New Arab that high-level talks are taking place between the two countries, aimed at reaching an agreement to address implementation difficulties that have persisted since July 2026.

The difficulties are linked to the worsening impact of the ongoing war in the Gulf and Yemen on the Saudi economy.

At the same time, Egypt is trying to keep the Saudi deposit at the Central Bank so that it remains part of its foreign currency reserves, enabling the country to deal with the repercussions of the war in the Gulf and Bab al-Mandeb, which are increasing as shipping and import costs rise and Suez Canal revenues decline.

Egypt also faces difficulties in obtaining concessional foreign loans after interest rates on the dollar and major currencies increased.

Deposits and IMF guarantees

Financing and investment expert Wael al-Nahhas said the Saudi deposit due in October is renewed periodically and is among Saudi medium- and short-term deposits.

He said that the deposit, originally worth $5.3 billion, is linked annually to a dollar return, raising its value at maturity to about $5.434 billion.

He explained that despite intensive talks between Saudi and Egyptian authorities over converting the value of these deposits into direct investments, the two sides have not yet reached decisive results regarding their fate.

Nahhas told The New Arab that the Saudi deposits were provided to Egypt as part of guarantees offered by the International Monetary Fund when it signed its latest agreement with Egypt in 2024, which provides for $18.3 billion in cash support from Gulf states that cannot be withdrawn before the end of the Extended Fund Facility programme, which runs until December 2026.

There are exceptions related to the purchase of stakes or shares in public assets offered under the asset sale programme approved by the fund. The foreign currency proceeds from deposits or purchases must also remain in the central bank's reserves.

This means the continuation of Gulf deposits was part of the guarantees for financing the fund's programme and not a separate banking arrangement.

Al-Nahhas pointed out that the failure to reach an agreement between Egypt and Saudi Arabia on the future of the first part, which represents more than 50% of the Saudi deposit at the central bank, just weeks before it falls due, is raising many concerns within the banking sector.

Banking sector's view

An investment expert at a state-owned bank said Saudi Arabia had previously announced in 2024 that it intended to convert its deposits at the central bank into investments to support the economy, similar to what Qatar and the UAE had done through investments in real estate and tourism projects on the Mediterranean coast.

The aim is to circulate Gulf capital within Egypt rather than allow it to leave, and help Cairo avoid the departure of Gulf deposits while also avoiding presenting them as debt that must be repaid in the state budget. In turn, this eases pressure on external debt and the Egyptian pound, which is weakening as the dollar rises in value and hot money leaves government debt instruments.

The banking expert told The New Arab that Saudi Arabia's failure to announce its final position on the $5.434 billion deposit due in October, as well as the other deposit due for repayment in 2027, is normal.

The matter can be settled at the last moment before the maturity date, as happened in previous years, when approvals came through central bank channels directly from the Saudi Arabian Monetary Authority (the Saudi central bank).

The agreement was then announced after it had been implemented.

Al-Nahhas, however, believes that the delay in announcing the future of the Saudi deposit is linked to political and economic calculations that have emerged recently, such as the Houthis escalating attacks against Saudi oil facilities and the country facing difficulties exporting oil, with the possibility of exports to Europe being halted during October.

This threatens to reduce the kingdom's hard currency revenues at a time when it is looking for resources to purchase alternative oil deals that would enable it to engineer oil deals for international markets, and places additional financial burdens on the kingdom, making it dependent of its external deposits for repayment.

Restrictions on foreign investment

Al-Nahhas noted that economic pressures had prompted Saudi authorities to issue a decision restricting the foreign investments of public money market funds, particularly in emerging markets exposed to risks, and will push the funds to rearrange their portfolios during a transition period of up to two years.

He explained that although the decision issued last week by the Saudi Capital Market Authority does not extend to the strategic investments of the Public Investment Fund or Saudi companies operating in Egypt, it requires funds whose foreign investments exceed 5% to regularise their positions within no more than two years, and includes not making, entering into or renewing any transaction that would keep the ratio above 5%.

Investments that exceed 20% of their net assets must reduce them to below 20% within six months, and must then complete the procedures to regularise their positions and reach the 5% ceiling.

In its latest report on the seventh review of the Egyptian economy, issued on 13 August 2026, the International Monetary Fund acknowledged that financing, debt and inflation risks remain high despite the Egyptian economy having overcome the initial shock of the US-Israeli war on Iran.

It said any regional escalation could once again put strong pressure on the dollar, reserves and growth.

The fund believes public debt is sustainable over the medium term, but not with a high degree of probability, as risks of sovereign stress remain.

Article translated from Arabic by Afrah Almatwari. To read the original, click here.