News / Middle East

Qatar Throws Egypt $2.5B Currency Lifeline

A man stands outside an exchange bureau in Cairo, December 30, 2012.
A man stands outside an exchange bureau in Cairo, December 30, 2012.
Reuters
Qatar threw Egypt an economic lifeline on Tuesday, announcing it had lent Egypt another $2 billion and given it an extra $500 million outright to help control a currency crisis.
 
Political strife has set off a rush to convert Egyptian pounds to dollars over the past several weeks, sending the currency to a record low against the U.S. dollar and draining foreign reserves to a critical level.
 
The government said it expected an International Monetary Fund technical committee to visit Cairo in two to three weeks' time to resume talks on a crucial $4.8 billion loan to plug balance of payments and budget deficits.
 
Qatar's handout appears to be another example of the Gulf state seeking to deepen its influence in a Middle East being reshaped by revolts that have unseated long-serving autocrats. Doha supported the uprising in Libya and remains a major backer of the revolt against Syrian President Bashar al-Assad. 
 
The aid is a political and economic bonus for both President Mohamed Morsi and the Muslim Brotherhood, the group that propelled him to power in a June election.
 
It eases the pressure on Morsi to negotiate an IMF agreement that will require him to implement unpopular austerity measures. That will be a relief for the Brotherhood as it gears up for forthcoming parliamentary polls.
 
"There was an initial package of $2.5 billion, of which $0.5 billion was a grant and $2 billion a deposit," Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani told reporters, referring to the aid it has provided since Egypt's uprising two years ago.
 
"We discussed transferring one of the deposits into an additional grant so that the grants became $1 billion and the deposits doubled to around $4 billion," he said of the new aid after meeting Egypt's Islamist president, Mohamed Morsi.
 
Hamad added that the new Qatari grants and deposits with Egypt's central bank had all arrived. ``Some of the final details with the deposits are being worked on with the technical people, but the amount is there,'' he said.
 
Solid ally
 
Abdulkhaleq Abdullah, a political analyst in the United Arab Emirates, said Qatar viewed Egypt as a valuable strategic asset and had invested more in the most populous Arab nation than any other Gulf Arab state since a popular uprising overthrew former President Hosni Mubarak in February 2011.
 
"Qatar wants a solid regional ally in Egypt," he said. "Along with Turkey, this allegiance or axis is fundamental to the regional role Qatar is trying to carve for itself."
 
The Qatari funds should help tide Egypt over until the government can seal the IMF agreement that analysts view as vital to give the government credibility with the markets.
 
The IMF's Middle East and Central Asia director, Masood Ahmed, left Cairo on Tuesday after meeting Morsi the day before.
 
"Negotiations with the IMF team will resume from where they stopped," Morsi's spokesman, Yasser Ali, said. Asked when the IMF's technical committee would visit Cairo, he said it was expected in the next two to three weeks.
 
Egypt struck an initial loan accord with the IMF in November but last month postponed the deal because of political unrest set off by Morsi's drive to fast-track a new constitution.
 
The unrest led Morsi to suspend increases in the sales tax on a range of goods and services that were deemed necessary to conclude an IMF deal.
 
Analysts said the Qatari funds gave breathing space to Morsi and to the Muslim Brotherhood's party from which he hails ahead of the election due to begin in the next few months.
 
"It's a big break for the Morsi government," said Shadi Hamid of the Brookings Doha Center. "It does give the Egyptian government more time to negotiate the [IMF] deal and build popular support for it."
 
Said Hirsh, an economist with Maplethorpe, said it was in no way a replacement to the IMF loan, as it was not conditional on implementing economic reforms sought by investors.
 
"Further delays to the IMF loan will not bode well for Egypt's external position," he said. "For now, foreign investors are still likely to sit and wait until a deal with the IMF is reached."
 
The Egyptian pound weakened to a record low of about 6.48 to the dollar on Tuesday after the central bank offered $60 million in the latest of a series of foreign currency auctions introduced in an attempt to contain the currency crisis.
 
The pound has weakened 4.6 percent on the interbank market and the central bank has spent a total of $420 million in the auctions since the system began on Dec. 30.
 
Foreign reserves have fallen by more than $20 billion and the currency has lost more than a tenth of its value and during the turbulent political transition since Mubarak's fall and the flight of tourists and investors, two Egypt's main sources of foreign exchange.
 
Tourism, industry
 
Qatar had already pledged enormous amounts of aid to Morsi's government since he became president in July, including four loans of $500 million each, with the first arriving in August and the last in December.
 
In September, Qatar also agreed to invest $8 billion for gas, power and iron and steel plants at the northern entrance to the Suez Canal and $10 billion for a giant tourist resort on the Mediterranean coast.
 
Sheikh Hamad said on Tuesday that these projects had been delayed, in part by a disagreement between Egyptian and Qatari technicians over systems and laws.
 
"Today we agreed to appoint an international specialized legal office to put a mechanism in place because these are huge projects and will last for long years and need accurate study," he said. 
 
Egyptian Prime Minister Hisham Kandil said progress on the projects had been held up by a lack of political will.

"I admit that there has been some slowness," he said.
 

You May Like

For Lebanon-based Refugees, Desperation Fuels Perilous Passage

In a war that has caused an estimated three million people to flee Syria, efforts to make perilous sea journey in search of asylum expected to increase More

South African Brewer Tackles Climate Change

Mega-brewer SAB Miller sent delegates to climate summit in Peru, says it is one of many private companies taking their own steps to fight climate change More

Indonesia Reports Increase in Citizens Joining Islamic State

Officials say more than 350 of its citizens are now in Syria or Iraq to fight with Islamic State - 50 more than last month More

This forum has been closed.
Comment Sorting
Comments
     
by: sayed.aborehab from: Egypt
January 09, 2013 3:46 AM
i don't know reason behind this full support from Qatar to Morsi Government and I don't know also the price that Egypt will payback


by: ali baba from: new york
January 08, 2013 10:32 PM
Egypt is facing economic crisis .it is the worst crisis in Egypt history. the approach to solve the problem is bad. we need a secular Gov. to attract investor and tourist. Because moersi is unpredictable, no investor will thrown his money in the sand for the beauty of morsi laugh


by: ali baba from: new york
January 08, 2013 10:26 PM
Qatar is helping Egypt to stabilizes the currency . it is a good help but it will not solve the problem. it is give temporary relief . Muslim brotherhood view that Islam is the solution is a disaster to Egypt. the country need investment and tourist to come back non of these solution will occur under Muslim brotherhood rules

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Will Pakistan School Shooting Galvanize Pakistan Against Extremism?i
X
Ayesha Tanzeem
December 17, 2014 11:54 AM
The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video Will Pakistan School Shooting Galvanize Pakistan Against Extremism?

The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
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.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.

All About America

AppleAndroid