Egypt has agreed to a $35bn deal with the United Arab Emirates to develop the town of Ras el-Hekma town on its northern coast, Egyptian Prime Minister Mostafa Madbouly announced on Friday after weeks of speculations.

Madbouly said at a news conference, which was attended by Egyptian and Emirati officials, that Egypt will receive an advance amount of $15bn in the coming week, and another $20bn within two months. 

The deal is the largest foreign direct investment in an urban development project in the country’s modern history. 

News about the sale has triggered condemnation by critics of the government, who said the land is one of Egypt’s most valuable coastal locations and that it should be developed by local investors. 

Madbouly said that the Egyptian state will have a share of the profits from this project, although it is a private enterprise.

He said that the area of ​​the Ras el-Hekma project is 170 million square metres, and will include residential neighborhoods, tourist resorts, schools, universities, an industrial zone, a central financial and business district, an international marina for tourist yachts, and an international airport south of the city.

Madbouly said that the deal will include $11bn already deposited by the UAE in the Central Bank, an amount that will be converted into a grant instead of a loan.

Concerning the fate of the residents of the Ras el-Hekma area, Madbouly said they would be relocated to other areas and would be provided financial compensation. He added that the project will alleviate the country’s economic crisis.

Egypt is currently in talks with the International Monetary Fund for a bailout deal that is expected to exceed $10bn. It is expected to be followed by currency devaluation to match black market rates – nearly double the official rate of 31 Egyptian pounds to the US dollar.

Egypt, home to more than 109 million people, is grappling with a severe economic crisis, with record inflation and foreign currency shortages. 

In August, annual inflation in Egypt reached close to 40 percent, according to official figures, plunging many Egyptians near or under the poverty line.

More than half the population had already been below or close to the poverty line before the current crisis. 

Foreign debt has quadrupled, reaching $164bn, over President Abdelfattah el-Sisi’s almost 10-year presidency. Debt servicing is currently consuming most of the state’s annual expenditures.

Egypt’s total foreign currency reserves are $35bn. According to the Egyptian Central Bank, the ratio of short-term debts to foreign currency reserves in 2022 passed 80 percent, double that of 2021.