The Kuwait Fund for Arab Economic Development, (KFAED) on Sunday signed a loan agreement with Egypt worth KD12.5 million ($42.5 million) to fund a project that will provide drinking water in the Sinai Peninsula.

The project is targeting some of Egypt's most underdeveloped areas, including the Sinai Peninsula's capital city of Al Arish, which suffers from a dearth of drinking water, KFAED's director general Abdulwahab Al Bader was quoted as saying by Wam, the Emirates official news agency.

He was quoted by the Kuwait News Agency (Kuna) as saying that the loan deal was the 45th that the Arab world's most populous nation has received from the Kuwaiti fund, with a collective value of KD833 million ($2.8 billion).

Meanwhile, Egypt's Minister of Investment and International Cooperation Dr Sahar Nasr pointed out that the loan agreement would be instrumental in providing adequate drinking water to residents of Al Arish.

She said that such projects help improve the quality of life in a restive region long plagued by terrorism, adding that "the only solution to counter terrorism is through economic and social prosperity."