News / Middle East

Egypt Signals Qatar Loan Already Spent

Traders work at the Egyptian stock exchange in Cairo, January 3, 2013.
Traders work at the Egyptian stock exchange in Cairo, January 3, 2013.
Reuters
Egypt's central bank said on Thursday that a $2 billion loan from Qatar arrived in December, implying that the money had already been eaten up defending the currency before the foreign reserves crisis became public late last year.
 
News of the Qatari loan broke this week, and markets assumed that Egypt therefore had a cushion that would allow it to keep the pound's depreciation orderly, supporting Egyptian assets.
 
Political strife in late November and early December set off a rush to convert Egyptian pounds to dollars, sending the currency to record lows on concerns the government might devalue or bring in capital controls.
 
The central bank, which has spent more than $20 billion defending the pound in the two years since Egypt's popular uprising, said on Dec. 29 that its foreign reserves had reached a "minimum and critical limit".
 
It also announced a new currency regime as it struggled to stabilise the pound. But on Sunday the bank said foreign reserves had fallen in December by only $21 million, to $15.015 billion.
 
Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani announced on Tuesday that Qatar had lent the country $2 billion and given it an extra $500 million outright.
 
Asked by email on Thursday if the deposit arrived in January or December, Nidal Assar, the bank's sub-governor for investment and foreign relations, replied: "December".
 
Analysts said that the Qatari deposit's arrival in December indicated that switching out of pounds and into dollars had been much greater than thought over the last few weeks.
 
"That shows the scale of dollarization in December and explains the shift to auctions on the part of the central bank," said Said Hirsh, an economist with Maplecroft.
 
Turning to the IMF
 
Egypt has been negotiating a $4.8 billion loan from the International Monetary Fund (IMF) to deal with the crisis and expects an IMF team to visit Cairo in two to three weeks.
 
The loan agreement was approved in principle in November, but political turmoil in December forced the government to delay a series of austerity measures deemed necessary to win the IMF board's final approval.
 
"Without Qatari aid, Egypt was on course for a full-blown financial crisis and, perhaps, a forced deal with the IMF by February," Hirsh said.
 
Egypt's ambassador to Turkey said Ankara had transferred $500 million into Egyptian coffers on Thursday, the Egyptian state news agency reported.
 
The pound weakened by 0.46 percent on the interbank market after a central bank auction of dollars on Thursday, the eighth such sale since it introduced a new regime to reduce pressure on its currency.
 
The pound has lost 11 percent since the uprising that removed President Hosni Mubarak in early 2011, half of it during the last two weeks. The central bank limits falls in the currency on the interbank market about 0.5 percent per day.
 
The bank sold $49.1 million at its daily currency auction on Thursday, bringing the total amount it has sold since it introduced the auction system on Dec. 30 to almost $520 million.
 
Economists and bankers said this drain on reserves is unsustainable.
 
Raza Agha, an economist with VTB Capital, said that if the $15 billion reseves number for December included the support from Qatar it meant that the political turmoil had pushed the central bank to spend $2 billion to support the pound and capital flight.
 
"It also suggests that January data is likely to show a decline in headline reserves," he said.

You May Like

Video Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

This forum has been closed.
Comment Sorting
Comments
     
by: ali baba from: new york
January 12, 2013 11:52 AM
any loan to Egypt is wasting because the economic crisis in Egypt is so severe and the Islamic approach will not ease the problem. investor lost the trust on moersi and his last word about Jew and describing them as a pigs and apes . this show moersi has not opened minded for change that badly needed to face that economic crisis. loan from IMF will not solve the problem . his lobbying to US for money should be denied. .

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid