UAE delivers $3 billion aid to Egypt

Cairo: Egypt’s central bank said it received $3 billion in aid from the UAE on Thursday, part of $12 billion that Gulf Arab states pledged after the military ousted Islamist President Mohammad Mursi early this month.

Central bank governor Hisham Ramez said in a text message to Reuters that the aid had arrived.

The UAE said last week that it would provide Egypt with $1 billion as a grant and a $2 billion loan in the form of an interest-free central bank deposit. Saudi Arabia pledged $5 billion and Kuwait, $4 billion.

The Saudi funds comprise a $2 billion central bank deposit, $2 billion in energy products, and $1 billion in cash. Egypt has struggled to pay for imports since the 2011 uprising that pushed Hosni Mubarak out of the presidency drove away tourists and foreign investors, two of its main sources of foreign currency.

Since then it has run through more than $20 billion in reserves, borrowed billions from abroad and delayed payments to oil companies.

The UAE will make a $1 billion grant to Egypt and a $2 billion loan, state news agency WAM said on July 9. The $2 billion loan would take the form of an interest-free deposit with Egypt’s central bank, WAM said.

“The UAE stands by Egypt and its people at this stage and trusts the choices of its people,” WAM quoted National Security Adviser Shaikh Hazza Bin Zayed as saying. “Egypt’s security and stability are the basis of Arab security.”

Egypt’s foreign reserves fell by $1.1 billion in June to $14.9 billion, representing less than three months of imports, considered by the International Monetary Fund to be the minimum safe cushion. Only about half of the reserves are in the form of cash or in securities that can easily be spent.

The country’s budget deficit has also widened dangerously over the last few months, prompting Mursi’s government to take the risky measure of ramping up its direct borrowing from the central bank.

In the first five months of 2013 alone, the deficit nearly doubled from the previous year to 113.4 billion Egyptian pounds ($16.2 billion), according to Finance Ministry figures.

Last year, the government had projected a deficit of 135 billion Egyptian pounds for the fiscal year that ended on June 30, 2013. But by the end of May, the deficit had already reached 202.9 billion pounds, with June yet to be reported.