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Egypt sees billions in aid from Saudi, UAE soon
Egypt expects $500 million from the Arab Monetary Fund by end-2011, according to its Finance Minister. Meanwhile, IMF aid remains an option as economy grows 2-3 percent this fiscal year.
September 8, 2011 2:45 by Reuters
Egypt expects to reach loan agreements soon with Saudi Arabia and the UAE worth several billions of dollars, while another $500 million should come from the Arab Monetary Fund, the country’s finance minister said on Wednesday.
Egypt’s military rulers turned down an offer of $3 billion from the International Monetary Fund in June, vowing to fund a budget deficit from domestic resources and foreign aid.
“There are talks about a package coming from Arab countries, from Saudi Arabia, from the Emirates. We are under discussion, but both of them have presented proposals of a couple of billion dollars each,” Egyptian Finance Minister Hazem el-Beblawi told Reuters on the sidelines of a meeting of Arab finance ministers in the UAE capital.
Asked when he expected a deal to be reached, he said: “Before the end of the year. It should be quite soon.”
No particular conditions were attached to the packages, Beblawi said, with repayment expected in around five years. He did not give the exact amounts involved.
GCC’S BILLIONS IN AID
The government has said it hopes to finance a projected 134 billion pounds spending gap by raising 14 billion pounds, or about $2.4 billion, from wealthy Arab countries and 120 billion pounds from the domestic treasury bill market.
Saudi Arabia and Qatar have already given a total $1 billion. UAE officials have been discussing a $3 billion package, the previous finance minister said in July.
Beblawi also said that Egypt — whose economy was thrown into crisis by the uprising against long-time ruler Hosni Mubarak earlier this year — was likely to receive a new drawing facility from the AMF, with the deal to be signed before the end of 2011.
“It is almost free of conditions. One of them is the so-called automatic loan that we are entitled to draw any time. The other is related to financial reform,” he said, adding that the loan’s interest rate was around 1.5 percent.
Egypt has also not given up on IMF aid, Beblawi said, but it preferred loans from Arab countries and financing from the local market to cover a budget gap of 8.6 percent of gross domestic product forecast for this fiscal year.
“For the time being, we are still assessing the situation. We consider it as an option, it is not accepted, it is not refused,” he said.
To avoid tapping the IMF cash, the government has revised the budget that began on July 1 by cutting forecast spending by 24 billion Egyptian pounds ($4 billion).
The military has been reluctant to be tied even to the lenient terms offered by the IMF as it seeks to avoid any foreign interference.
GOVERNMENT AID TARGETS
A Reuters estimate suggested the government needs to raise at least 50 billion pounds a month in T-bills and bonds to meet its financing needs. However, the ministry has decided not to take the full amount on several recent T-bill sales.
“We do not want to pressurise the local market, to crowd out financing for the local market, but also, we would like to keep the interest rates at this level. Because you increase the amounts and you risk raising interest rates,” Beblawi said.
He said earlier on Wednesday that tapping international markets with a Eurobond issue was not being considered.
The minister also said that the current pound exchange rate was good for the economy, which he saw growing by 2 to 3 percent this fiscal year.
“I think the longer we maintain the current rate, the better. Not only for the health of…
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