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Egypt's New Capital Search 'Uphill'

FILE - An employee counts money at an exchange office in downtown Cairo, Egypt, on June 5, 2014.

CAIRO - Egypt faces an increasingly tough task raising cash for foreign debt repayments after external borrowing quadrupled over the past eight years to help fund a new capital, build infrastructure, buy weapons and support an overvalued currency.

The Egyptian government says it will meet repayments, but it has not delivered on long-promised structural changes to its economy and its bid to raise cash by selling state holdings has failed to offload any major assets for foreign currency for nearly a year.

Amid a foreign currency crunch, Egypt has drawn down net foreign assets in the banking system by more than $40 billion in two years, partly used to prop up the pound.

Prime Minister Moustafa Madbouly has, meanwhile, sought to reassure investors about the state's finances. "I affirm that the Egyptian state has not failed and will not fail to pay any of its international obligations," he said in April.

"I think the biggest problem right now is that no one is seeing enough reform," said Monica Malik at Abu Dhabi-based bank ADCB. "Egypt is waiting for capital flows, and no one I speak to is ready to put that in again until they see the reform."

Egypt said it will meet foreign liabilities and raise funds by selling assets, including $2 billion by the end of June.

The Finance Ministry did not respond to a request for comment.

Investors have long pushed for a more flexible currency. But Egypt's pound has not moved against the dollar for three months despite a pledge to the International Monetary Fund to free it up under a $3 billion financial package agreed in December.

Few of Cairo's grand projects are generating additional hard currency inflows, while foreign investors have added to its woes by snubbing Egypt and other emerging markets since the start of the Ukraine war and as global borrowing costs have climbed.