As the country’s reserves fall and unemployment increases, we ask if it is tipping towards an economic breaking point.
Qatar has agreed to buy bonds from Egypt worth $3bn over and above a previously announced aid package.
The announcement by Hamad bin Jassim Al Thani, the Qatari prime minister, comes as Cairo holds difficult talks with the International Monetary Fund over a loan of $4.8bn as part of a financing programme to lift Egypt’s economy out of crisis.
“We have agreed to add Egypt government bonds worth $3bn,” Hamad said at a joint press conference in Doha with his Egyptian counterpart, Hisham Qandil, on Wednesday.
Gas-rich Qatar has already announced an aid package of $5bn to Egypt, comprising an outright grant of $1bn and $4bn in bank deposits.
Hamad said Qatar, the biggest financial backer of Egypt’s Islamist-led government, did not ask for anything in return for its aid.
Qandil lauded Qatari investments in Egypt, but insisted that those represent about 18 to 20 percent of foreign investments, and are “not as big as rumoured to be”.
A delegation of the IMF is visiting Cairo for talks on the financing programme and is expected to examine Egypt’s efforts at economic liberalisation.
The Egyptian government has been walking a tightrope as the measures required by the international lender are likely to generate social tensions.
The size of the loan may change, IMF officials have said, without elaborating.
Drop in revenue
Egypt’s authorities believe the IMF loan will help restore investor confidence in the country, where unrest that accompanied the 2011 uprising that ended Hosni Mubarak’s long-running presidency has caused a significant drop in revenue from the once-lucrative tourism industry.
Foreign reserves have plunged from $36bn to some $13bn in two years, and the budget deficit is increasing.
However, Egypt received another welcome boost on Wednesday night when Libya reportedly pledged to give Egypt a $2bn five-year, interest-free loan under.
The Egyptian state news agency MENA quoted a finance ministry official as saying that the loan would have a three-year grace period and was intended “to support the Egyptian economy and the state budget and foreign currency reserves”.
President Mohamed Morsi’s administration has been plagued by unrest and deadly clashes between protesters and police, blocking efforts to build broad-based support for a needed programme of economic-policy changes.
Qatar has been accused of supporting Morsi’s Muslim Brotherhood.
In his remarks on Wednesday, Hamad insisted that Qatar “will not be affected” by campaigns against it in Egyptian media.
“Sadly, media are reporting positive things negatively,” he said.
“But this will not affect Qatar’s way of dealing with our brother’s in Egypt.”