The funds will be deposited at Egypt’s central bank, Qatari Prime Minister Sheik Hamad Bin Jassim Al Thani said at a press conference today in the Gulf state with his Egyptian counterpart Hisham Qandil. Egypt’s Eurobonds extended their rally after the announcement, with the yield on debt due in 2020 dropping 19 basis points to 7.23 percent at 12:45 p.m. in Cairo.
Qatar has already provided Egypt with $5 billion in deposits and grants, helping to shore up the finances of the Arab world’s most populous nation as investment and tourism declined amid the turmoil that followed the 2011 uprising against Hosni Mubarak. The Egyptian premier and several other top ministers arrived yesterday, as an IMF technical team continues talks in Cairo over Egypt’s $4.8 billion loan request.
Two years of political unrest have left Egypt’s economy growing at the slowest rate in two decades. The nation’s foreign currency reserves plunged to $13.4 billion last month, more than 60 percent below their December 2010 level, and its currency has dropped more than 10 percent in the past four months. Officials say they aim to boost reserves to $16 billion by the end of June, without saying how.
The Qatari funds will be a short-term boost given the current economic situation in Egypt, “but does it do anything to help Egypt come out of where it is? I don’t think so,” Said Hirsh, an independent economist based in London, said by phone. “There’s just a total lack of clarity about what this government is trying to do.”
Egypt has been in talks with the IMF on a loan accord for two years without reaching an agreement. Negotiations have been interrupted frequently as the chronic unrest and political gridlock in the country ran counter to the political consensus sought by the IMF for an economic program, while the government sought to avoid budget cuts that would add to the unrest.
Mursi faces near-daily protests, with the country’s growing polarization most recently illustrated in fatal clashes between Muslims and Christians.
There is also widespread anger at rising prices, fuel shortages and rolling blackouts ahead of the key summer months that threaten the government’s ability to cut energy subsidies, a policy favored by the IMF. Inflation has jumped this year, though it unexpectedly eased to 7.6 percent from 8.2 percent last month, according to a report today.
Officials warn the country could miss its budget deficit target of 10.9 percent of gross domestic product if spending cuts are not enacted.
Qatar, the world’s biggest exporter of liquefied natural gas, also will cover Egypt’s gas export obligations over the summer, Al Thani said. The move could ease the burden on Egypt, where officials have traded accusations over why blackouts are taking place ahead of the summer.
Al Thani denied that Qatar has been using its wealth to buy influence in the country, as reports in the Egyptian media have suggested.
“We don’t ask for anything from the Egyptian government in exchange for the Qatari aid,” he said.
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