- Cash injection could help ease Egypt’s currency shortage
- Loan accord is still awaiting legal opinion of State Council
Egypt will “soon” receive the first tranche of a $1.5 billion loan from Saudi Arabia, an Egyptian minister said, a cash injection that could help to ease a dollar shortage that has weighed on economic growth.
The first payment will be about $500 million, Egypt’s Minister of International Cooperation Sahar Nasr said. The loan is one of a package of agreements worth $25 billion signed during Saudi King Salman’s visit to Cairo in April, which include a $16 billion investment fund and a plan to build a bridge connecting the two nations. A Saudi delegation will visit Egypt next week, Nasr said.
The deal represents a shift in Saudi Arabia’s strategy to support Egypt through investment rather than aid as it struggles to shake the economic and political turmoil that followed President Hosni Mubarak’s ouster in 2011. Though stable at around $16 billion-$17 billion since September, Egypt’s foreign currency reserves remain less than half the level they were before the uprising, in spite of billions of dollars in aid from Saudi Arabia, Kuwait, the U.A.E. and Qatar.
Egypt’s currency shortage is also showing few signs of abating. The pound weakened to a record low 12 per dollar in black market trading on Thursday, compared to the official rate of 8.8, according to a Bloomberg survey. In the latest attempt to stem outflows, Egyptian banks are limiting overseas withdrawals on pound-denominated credit and debit cards.
The Saudi loan accord, which was approved by parliament last month, is now awaiting the legal opinion of Egypt’s State Council, the normal procedure for all such agreements.