(AFP Photo)
By: Lamia Nabil
Qatari Minister of Finance Youssef Kamal said on Sunday that Qatar will not be offering Egypt any further aid in the short term.
Kamal also added that Qatar gave Egypt $5bn, confirming that there are currently no intentions to increase this.
Qatar is one of the most prominent sources of international financial aid that Egypt has depended on since the revolution. It is considered a key source of financing through its Islamic-based mechanism for loans and deposits which it has made to the Central Bank of Egypt.
“I’m happy about the decision,” said Dr Rashad Abdo, an economic expert. “The Egyptian government will now have to depend on itself, and it has to put into effect substantive economic plans instead of relying on aid and financial help.”
“I liken the situation to that of a bad student used to get additional grades from his teachers to pass his exams, but who suddenly has to actually study after the teacher stops doing this,” he continued.
“The national economy will not recover if we rely on Qatari aid,” he said. “It will only do so through hard work, offering an attractive environment for investors, and substantive economic strategies.”
Abdo also pointed out that Egypt’s foreign currency reserves now stand at $13.5bn; $4bn of which consist of the aforementioned Qatari deposits into the Central Bank, with $1bn in Saudi Arabian deposits, another $1bn in Turkish deposits, and $3.8bn in the form of gold reserves.
“The government must work, and work very hard, in order to feed Egyptian citizens,” he said.
Abdo also characterised Qatar’s move to deposit funds into the Central Bank as a “known political strategy that Qatar uses to play a more vital role in the region”.
According to an African Economic Outlook report, the economic cost of the revolution stands at EGP 40bn in 2010/2011, or around 2.9% of GDP for that period, and EGP 65bn in 2011/2013, around 4.9% of GDP for the same period. This is mainly due, the report said, to decreased tourism receipts and reduction in foreign direct investment.
The report predicted the Egyptian economy will grow 3.6% in 2012/13.
The report added that the current economic situation in the country could also lead to a greater demand for dollars and lower bank deposits, which in turn would encourage more capital outflows. Egypt’s net international reserves dropped from $35bn in January 2011 to $16.4bn in January 2012, and then to $13.6bn in January 2013, increasing the risk of “speculative attacks”, the report said.
Avoiding a devaluation of the Egyptian pound against the US dollar will become increasingly difficult if the government cannot find new sources of FDI, the report said.
Economic expert Ossama Mourad said expressed some worry over Qatar’s current interest in the Egyptian economy. “Our allies in the gulf are well known: Saudi Arabia and the UAE; and there are historical links between us regardless of the political situation. Qatar has its own intentions. I would consider this an attempt to put pressure on the Egyptian Government to acquiesce to Qatari intentions even before they ask,” he continued, adding that “we don’t need anything from them [Qatar]”.
