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Middle East

Qatar increases aid to Egypt to $5bn

Oil-rich gulf country pledges total of $5bn in financial aid to bolster Cairo's dwindling foreign currency reserves.
Last Modified: 08 Jan 2013 17:58
Qatar said it will increase its financial aid to Egypt by $2.5bn to a total of $5bn [AFP]

Qatar has said it would lend Egypt's government an additional $2bn and grant it an extra $500m outright, extending a lifeline as the government battles to contain a currency crisis.

"There was an initial package of $2.5 billion, of which $0.5bn was a grant and $2bn a deposit," Prime Minister Hamad Bin Jassim Al-Thani told reporters on Tuesday after meeting Egyptian President Mohamed Morsi.

Political strife has triggered a rush to convert Egyptian pounds to dollars over the past several weeks, sending the currency to a record low against the dollar.

"We discussed transferring one of the deposits into an additional grant so that the grants became $1bn and the deposits double to around $4bn,"  Al-Thani said.

IMF committed

The press conference came shortly after a government statement said it had "fruitful" discussions with a visiting IMF delegation.

An IMF team is expected to arrive within weeks for further talks after a delegation headed by Ahmed Massood, the monetary fund's Middle East director met with President Mohamed Morsi and other Egyptian officials on Monday.

The IMF, which was reported to have pledged $4.8bn, "remained committed to supporting Egypt in confronting its economic challenges," said a statement by Prime Minister Hisham Qandil on Tuesday.

The IMF "views the authorities' determination on taking the necessary steps to achieve financial stability as encouraging," the statement said.

Egypt had expected the IMF loan, that would cover a widening budget deficit and hoped to provide crucial encouragement for foreign investors in the restive market, in December or January, but weeks of sometimes deadly street clashes and protests postponed the aid.

Morsi's government has also temporarily balked at raising taxes and other measures of an economic reform programme in the face of simmering opposition ahead of parliamentary elections in two months.

Egypt's currency has plunged to a record low over the past week as the Central Bank began auctioning dollars to preserve dwindling foreign reserves.

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