Egypt Said to Get $2 Billion Saudi Deposit in IMF Deal Boostby
Egypt received the deposit in September, an official said
Financing brings Egypt closer to securing $12 billion IMF loan
The official, who asked not to be identified because the information isn’t yet public yet, didn’t specify when Egypt received the funds. The deposit arrived in September, another Egyptian official said, also speaking on condition of anonymity. Net foreign reserves rose by $3 billion last month to $19.6 billion.
Egypt is seeking as much as $6 billion from bilateral creditors to meet the conditions for the IMF’s board to consider the loan, which officials hope will help restore investor confidence and end a foreign-currency shortage. Confirmation of the deposit may help to end speculation that recent tensions between the two countries would prevent the Saudi payment, putting the IMF loan -- and other measures designed to overhaul the economy -- at risk.
The news eases concerns that the political rift “would delay the build up of a foreign-currency buffer necessary to float the Egyptian pound and close the IMF deal," said Hany Farahat, senior economist at CI Capital, a subsidiary of Commercial International Bank, in Cairo. Egypt’s “migration to a managed floating currency regime in the coming weeks is now more feasible," he said.
Officials at the Saudi finance ministry and central bank couldn’t be reached for comment after regular working hours on Wednesday.
Egyptian stocks rose the most in the world on Thursday, bucking declines across emerging markets on speculation that the Saudi cash would induce devaluation of the pound. The benchmark EGX 30 Index surged 3 percent as of 11:17 a.m. in Cairo, while 12-month non-forward contracts for the pound slumped 3.5 percent to a record 13.5 per dollar.
Following the 2013 ouster of Islamist President Mohamed Mursi, Saudi Arabia and other Gulf Arab nations offered billions of dollars in aid to buoy a military-backed government crack down on the Muslim Brotherhood, a group viewed as a threat to the Gulf monarchies. The late Saudi king, King Abdullah, privately told U.S. Secretary of State John Kerry in 2014 -- the year former army chief Abdel-Fattah El-Sisi was elected president -- that Egypt was too important to be allowed to fail.
But with Egyptian authorities already struggling to pass a maritime border pact with its long-time backer, a rare Saudi public rebuke of Cairo at the United Nations over Syria fueled doubts about the kingdom’s commitment to supporting Egypt.
At the UN Security Council session during the weekend, Egypt voted in favor of a resolution calling for the halt of Russian bombing, which was also supported by Saudi Arabia. When it failed, Egypt backed a counter motion from Russia, which also didn’t pass. The Saudi envoy said it was “painful” that the position of non-Arab countries was closer to the kingdom’s than Egypt’s.
The spat also coincided with a decision by Saudi Aramco to halt this month’s petroleum supplies to Egypt.
Before the UN dispute and the Aramco announcement, a senior IMF official said the fund’s board may approve the loan to Egypt by early November. Egyptian stocks gained 6.2 percent last week on signs a deal was on track.
By the time trading resumed on Sunday, that optimism had evaporated. The benchmark EGX30 index fell for a third day on Wednesday, and the Egyptian pound this week slumped to a record low 14.78 per dollar in the black market -- compared to the official rate of 8.88.
The Egyptian media reacted strongly to the tensions. Pro-government television presenter Ahmed Mousa said Egypt doesn’t "owe bills" to anyone. “A Brotherhood on the Line!” was a headline in the privately-owned Al-Watan newspaper, which compared Saudi Arabia’s earlier “true support" under King Abdullah with its new “conditional giving.”
Still, the Saudi deposit wasn’t the only positive indication about the two countries’ relations on Wednesday. Saudi-owned Al Arabiya television reported that the Saudi ambassador to Egypt flew to Riyadh to arrange for a visit by a high-level Egyptian delegation within the coming days.