Egypt says Saudis agree to $4 bln in assistance

Egypt says Saudis agree to $4 bln in assistance

Saudi sets aside $4 billion for Egypt, which has been asking donors to help bridge estimated $12 billion funding gap in wake of protests.

May 22, 2011 10:54 by Reuters

Saudi Arabia has agreed to provide cash-strapped Egypt with about $4 billion dollars to support its economy, Egypt’s state MENA news agency reported on Saturday.

Cairo has been asking donors and the International Monetary Fund (IMF) to help bridge a funding gap through mid-2012 estimated at $10-12 billion in the wake of the mass protests that ousted President Hosni Mubarak on Feb. 11.

The turmoil has caused tourism and investor revenue to dry up at a time when high popular expectations have increased the pressure on the budget.

“The $4 billion will be distributed in the form of soft loans, deposits and grants,” MENA quoted Field Marshal Mohamed Hussein Tantawi, head of Egypt’s ruling military council, as saying. It did not provide a timeframe or other details.

Al-Ahram newspaper, quoting unnamed Arab sources in Cairo, said on Saturday the $4 billion Saudi economic package would support Egypt’s general budget, the central bank, development and other projects and bond purchases.

Egypt’s economy contracted by an estimated 7 percent in the January-to-March quarter.

Egyptian Finance Minister Samir Radwan said on Thursday he expected gross domestic product would grow by only 3 to 4 per cent in fiscal year 2011/12.

US President Barack Obama in a speech on Thursday pledged to relieve Egypt of up to $1 billion in debt and to guarantee another $1 billion in borrowing to finance infrastructure and job creation.

The European Bank for Reconstruction and Development said on Saturday it would explore how to direct funds to Egypt and other Arab states in the same way it supported Communist after the fall of the Iron Curtain more than two decades ago.

Officials have said lending to Egypt could start at around 100 million to 200 million euros ($145 million to $290 million). An EBRD spokesman said a team would go there in the next few weeks to identify infrastructure, agriculture and other potential projects. (Reporting by Patrick Werr)