Egypt says to pay $1.5bn arrears to foreign oil firms

The Egyptian government has approved payment of $1.5 billion of the $6 billion it says it owes foreign oil firms, the prime minister said on Wednesday, saying the failure to pay off the debt was holding the economy back.

Egypt’s economy has been battered by two years of political upheaval that have frightened away tourists and investors, cutting tax revenues and inflows of foreign currency. That has increased pressure on the government to get oil companies investing again in extraction and exploration.

“There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told an economic conference designed to lure investment from Gulf states, adding the arrears had prevented companies from investing.

He also said the government was targeting economic growth of 3.5 percent in the fiscal year to end-June.

Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.

Financial disclosures by firms including BP PLC, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.

Authorities have repeatedly promised to repay arrears since the army toppled Islamist President Mohammad Mursi on July 3 and after oil-producing Gulf Arab states, which fiercely opposed his Muslim Brotherhood, promised financial support to Egypt.

In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans, and oil products.

Egypt expects to receive more aid from Gulf states, the central bank governor said on Wednesday, on top of the $12 billion already pledged.

Asked whether he anticipated more Gulf aid, Central Bank Governor Hisham Ramez said: “Yes we do ... But I have no number in mind. Actually we’re not only counting on aid, we’re counting on investments to come in.”

The news came on the same day that Egypt’s foreign currency reserves dipped slightly in November, Ramez said.

The reserves were $18.59 billion at the end of October. The November figure is due out soon.