(AFP Photo)
The Central Bank of Egypt confirmed it had received the recently pledged $3bn in aid from the United Arab Emirates on Thursday.
The UAE’s aid to Egypt, comprised of a $1bn grant and a $2bn interest-free deposit in the central bank, is part of the larger $12bn package pledged by Gulf Arab states after the military deposed President Mohamed Morsi early this month following massive nationwide protests.
Central Bank Governor Hisham Ramez said that $2bn of Saudi Arabia’s $5bn in aid is expected to arrive shortly in the form of an interest-free deposit at the bank. Saudi was among the Gulf lenders which pledged $5bn in aid, divided into $1bn cash, $2bn for petroleum products and another $2bn deposit.
Kuwait was also among the lenders, promising an aid package of $4bn to support Egypt’s troubled economy, $2bn of which will be in the form of a deposit to the bank, while $1bn will be offered as a non-refundable grant and $1bn directed to fuel and petroleum products, the gulf state’s official news agency KUNA reported.
Ramez reported that the date to receive Kuwait’s aid is yet to be set.
The Gulf’s economic lifelines are expected by various reports to raise Egypt’s net foreign currency reserves to more than $20bn, up from $14.bn as of the end of June. In May, foreign reserves had registered $16.04bn due to injections of foreign aid from Turkey, Qatar and Libya.
According to a report published by MubasherTrade, the Gulf aid should alleviate economic burdens off of the prospective government, especially the energy crisis, due to the UAE’s contribution of gasoline and diesel shipments.
“This should provide a cushion to the Egyptian economy, covering an increasing budget deficit and falling foreign reserves, in case the IMF loan is not secured in the short-term,” the report stated, taking into consideration political stability.
Alaa Mostafa, CFO at Elsewedy Cables and financial expert, said any increase in Egypt’s foreign reserves levels is “unlikely as long as political instability remains.”
Mostafa said the recent injections of Gulf aid had bolstered reserves, but the aid’s value is “economically misleading.”
“In order to not jump to any conclusions, we must first look at factors such as tourism revenues, production and exportation before we say we have substantial foreign currency reserves,” Moustafa said.
“We have a real problem in all these elements, which are heavily influenced by political instability. We can’t really say there’s a real boost in the reserves as long as these elements are still negatively affected,” he said.
Since the ouster of President Hosni Mubarak in 2011, Egypt has been struggling to purchase imports of wheat and fuel due to lack of foreign currency reserves. Foreign currency reserves stood at $36bn on the eve of the revolution.
