Oct. 27 (Bloomberg) -- Egypt secured $2.9 billion in additional aid from the United Arab Emirates to fund development projects, a move Prime Minister Hazem El Beblawi said he hopes to replicate with other countries.
The U.A.E. announced yesterday a $4.9 billion package to help the Egyptian economy recover after the ouster of Islamist President Mohamed Mursi in July. The amount includes a $1 billion grant to the central bank transfered in July and about $1 billion already being used to help meet Egypt’s fuel and hydrocarbon needs. The money doesn’t include a $2 billion deposit at the central bank, El Beblawi said in an interview.
Egypt will use the aid to finance infrastructure projects to revive an economy that’s been stuck in the worst slowdown in two decades since the 2011 uprising that toppled President Hosni Mubarak. The plan includes building 25 wheat silos, 100 schools and 79 health-care centers, according to yesterday’s announcement, carried by the U.A.E.’s official news agency.
The package “is a successful model and I hope that this model can be repeated,” El Beblawi said in an interview yesterday in Abu Dhabi, the U.A.E.’s capital. The government expects “the biggest part of the program to be implemented” within about nine months, he said.
Egypt is already drawing on the U.A.E. aid allocated to fuel products, El Beblawi said. “This will continue until the end of the year,” he said.
Asked today at a televised press conference about the possibility of additional aid from other countries, he replied: “There is a kind of understanding that what the Emirates has done is not a solitary action but represents a collective vision of the Gulf countries, especially Saudi Arabia and Kuwait.”
The Egyptian central bank has received $7 billion in aid from the U.A.E., Saudi Arabia and Kuwait to bolster foreign exchange reserves after the military removed Mursi from power on July 3 following days of mass protests against his one-year rule. The funds helped the Egyptian pound recover and lowered the government’s domestic borrowing costs.
The benchmark EGX 30 Index of stocks climbed 0.8 percent as of 12:31 p.m. in Cairo, bringing gains since Mursi’s ouster to 25 percent.
Gulf aid has led Egypt to suspend efforts to seek an $4.8 billion IMF loan it had pursued to boost growth and cut one of the highest budget deficits in the Middle East. The government aims to accelerate growth to at least 3.5 percent this fiscal year ending in June from about 2 percent in the previous year while reducing the budget shortfall to about 10 percent of economic output from almost 14 percent.
The U.A.E.’s package signals a “new pattern where Arab countries’ support will take more the form of project financing” instead of cash support, said Mohamed Abu Basha, a Cairo-based economist at investment bank EFG-Hermes. The decline in tourism revenue and “weak” capital flows suggest Egypt will still need “additional financial support to shore up foreign reserves towards mid-2014 as we continue to see weak dynamics for the balance of payments,” he said.
For now, the government sees no immediate need for more aid to improve foreign reserves, which stood at $18.7 billion in September, El Beblawi said. “If we need that we will certainly make that known,” he said. “At present the reserves are good and the balance of payments is improving. We hope the political situation stabilizes and tourism will recover.”
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