Tuesday,24 October, 2017
Current issue | Issue 1293, (28 April - 4 May 2016)
Tuesday,24 October, 2017
Issue 1293, (28 April - 4 May 2016)

Ahram Weekly

Firm Gulf support

The latest aid package from the UAE proves that the Gulf country is firm in its support for Egypt, reports Nesma Nowar

Al-Ahram Weekly

The United Arab Emirates (UAE) has pledged $4 billion to Egypt, half of it in investment and half as a central bank deposit to support Egypt’s cash reserves, the UAE state news agency WAM said on Friday.

The announcement came at the end of a visit by Abu Dhabi’s crown prince, Sheikh Mohamed bin Zayed Al-Nahyan, to Egypt on Friday. The funds are aimed at promoting development in Egypt, which has a “pivotal role” in the region, WAM quoted Sheikh Mohamed as saying.

Tarek Fayed, deputy governor of the Central Bank of Egypt (CBE), told the newspaper Al-Sharq Al-Awsat on Friday that the deposit will significantly support the bank’s reserves and help it fight speculation on the black market.

Egypt’s foreign currency reserves stood at $16.5 billion in March, less than half of the $36 billion they registered before the 2011 Revolution, which was followed by political and security unrest that scared off investors and tourists, the main source of the country’s foreign currency.

The reserves are expected to increase to about $18.5 billion with the UAE funds. CBE Governor Tarek Amer has set a goal of $25 billion in foreign exchange reserves before the end of the year. Amer said in an interview earlier this year that this is the threshold at which he will consider a further devaluation of the pound.

Egypt is witnessing a severe foreign currency crunch that has prompted the CBE to devalue the pound, which now stands at LE8.78 against the dollar, though it sells at around LE11.3 against the dollar on the black market.

Last week, dollars were sold at LE11.47 on the black market, a record 29 per cent premium on the official rate, according to a Bloomberg survey on Wednesday. This surpasses the 24 per cent gap that existed before the biggest devaluation of the pound in 13 years, carried out on 14 March.

Amer blamed the “exaggerated” and “unjustified” rise in the exchange rate on speculation and denied any intention to devalue the pound further.

Mokhtar Al-Sherif, an economic expert, believes that the UAE deposit has helped ease the foreign currency shortage as it has increased the country’s foreign reserves. “The deposit will not end the problem, but it will ease the pressure,” Al-Sherif said.

He also said that the UAE’s pledge to make investments at this time is very important as it is a “vote of confidence” in the Egyptian economy and shows that the country can attract investment, encouraging other investors.

It is not clear if this pledge is the same as the one made by the Gulf country at the Egypt Economic Development Conference(EEDC) in Sharm El-Sheikh last year, along with pledges from other Gulf Arab states.

At the conference, Saudi Arabia, Kuwait and the UAE each pledged $4 billion, including a total of $3 billion of deposits in Egypt’s central bank. Al-Sherif said he thought the new sum is part of a new package as there has been no announcement from the UAE that the newly announced funds are part of last year’s pledge.

Along with Saudi Arabia and Kuwait, the UAE has emerged as one of Egypt’s most robust supporters following the 2013 ouster of Islamist former president Mohamed Morsi, providing Cairo with more than $30 billion in aid.

After Morsi’s removal, the UAE provided Egypt with $3 billion in financial aid. In October 2013 the two states signed an agreement to support development in Egypt that saw the UAE offering the sum of $4.9 billion to carry out projects to upgrade the service sector in order to enhance living standards and human resources in Egypt.

UAE investments in Egypt have hit $4.5 billion, UAE Economy Minister Sultan bin Saeed Al-Mansoori said in March. He said that the investments were made by 520 Emirati companies in different sectors, mainly real estate and commercial projects.

The UAE is now the second-biggest investor in Egypt after Saudi Arabia among Arab investors, and the third among foreign investors. In the first nine months of 2015, foreign trade between the two countries stood at $1.5 billion.

Egypt’s main exports to the UAE include smart cards, copper products, electrical connectors and cables, furniture, clothing and marble, while its imports include gold, polyethylene, handsets, fabrics and textiles.

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