Saudi Arabia approves $5 billion aid package to Egypt

Saudi Arabia said it will deposit $2 billion in Egypt’s Central Bank. (Reuters)

Saudi Arabia approved on Tuesday a $5 billion aid package to Egypt, as the Arab world’s biggest country struggles with a high budget deficit and rising unemployment.

Part of that aid, $2 billion, will be in the form of petroleum and gas aid products, Al Arabiya television quoted the kingdom’s finance minister as saying.

Another $ 2 billion will be in the form of a deposit at Egypt's central bank and $1 billion will be given to the struggling Arab nation as a grant.

Earlier, The United Arab Emirates agreed to give Egypt $1 billion and lent it another $2 billion, an Egyptian source close to the talks told Reuters on Tuesday.

The amount was expected to be part of a larger financial package from the UAE, the source said, adding that the loan would be in the form of a deposit at Egypt's central bank, although the interest rate and maturity had yet to be finalized.

The UAE was one of the first countries to congratulate Egypt following the army’s decision to oust Islamist President Mohammad Mursi – who hails from the Muslim Brotherhood.

The aid is a clear sign of shifting policies among the wealthy Gulf nations toward Egypt. Qatar had been a main backer of the Brotherhood, giving Mursi's government several billion dollars during his year in office, according to Associated Press.

Egypt's foreign reserves stood at just $14.9 billion at the end of June, according to the country's central bank, less than half the amount in early 2011. The reserves, needed to pay for vital imports but also used to prop up the local currency, have taken a hit during continuous political turmoil and stand at what the central bank admits is a critical level.

Mass street protests against Mursi prompted the military to take over last week and name a new interim president, but Mursi's Brotherhood supporters say they will protest until he is reinstated. The latest turmoil is expected to further scare away tourists and foreign investors from Egypt.

The new Gulf assistance might stave off a crisis over currency reserves.

While Saudi Arabia helped Egypt with almost $2 billion in aid after Mursi was elected last year, the additional $5 billion announced Tuesday marks a significantly higher amount and reflects the kingdom's support of the latest changes in Cairo, Associated Press reported.

Saudi Finance Minister Ibrahim al-Assaf said the package includes $2 billion to be deposited in Egypt's Central Bank, $2 billion worth of oil and gas and $1 billion in cash.

The United Arab Emirates, among the leading Arab critics of the Brotherhood, was involved in a diplomatic row with Mursi's government over the arrest of several Egyptians accused of forming a Brotherhood cell there. The crackdown prompted some Islamists in Egypt to sharply criticize the Emirates, which had warm relations with ex-President Hosni Mubarak, who was deposed in 2011.

The official Emirates news agency WAM said the UAE offered a $1 billion grant and a $2 billion no-interest loan to Egypt.

 

(With Associated Press)

 

 

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