Kuwait, the oil-rich US ally, has announced an aid package of $4bn to Egypt, a day after neighbouring United Arab Emirates (UAE) and Saudi Arabia pledged a total of $8bn in aid, one week after the ouster of Islamist president Mohamed Morsi.
According Kuwait’s official news agency, KUNA, $2bn of the package will be in the form of deposit to the Central Bank of Egypt, while $1bn will be offered as a non-refundable grant. The Gulf state will also provide cash-strapped Egypt with fuel and petroleum products worth $1bn, KUNA’s report said.
Commenting on the aid, Bank of America Merrill Lynch Global Research said in a report issued on July 10 that it “will alleviate the concerns about the external position and the transition, in our view,” adding “we suggested Egypt need roughly $8bn to keep foreign international (FX) reserves stable over the next 18 months.”
“This would depend on the Central Bank of Egypt FX management framework as well,” added the report.
“The level of success of any aid mainly relies on how it will be employed and placed in the economy,” said Hanaa Ebeid, a senior researcher at the Ahram Centre for Strategic Studies.
“We have major problems such as the budget deficit and the low foreign reserves, so we can consider it as a temporary relief to assist normal Egyptian everyday life, but it will not result in an economic development,” she added.
When asked whether the introduction of violence after the 30 June revolution would affect the delivery of these aids, Ebeid said: “The violence itself will not have a major influence on the economy but political stability is a background condition for the economic development of any country.”
Angus Blair, the CEO of Signet Institute, defines the lack of political stability that the country is experiencing as “a fundamental problem”.
“Aids will assist the country getting the imports it needs but unless the issue of violence is solved, the country will face problems paying the bills,” Blair added.
The UAE and Saudi Arabia announced that Egypt will receive an $8bn aid package; the KSA will contribute with $5bn and UAE will offer $3bn. Saudi’s aid will be divided to $1bn cash, $2bn for petroleum products and another $2bn deposit. The UAE will contribute a $1bn grant and $2bn interest-free deposit with the central bank.
Several businesses have launched the 306306 “Support Egypt” campaign, announced in a statement issued by the central bank on 7 July. Contributions to these bank accounts were not limited to businessmen; several syndicates have also showcased their support by providing donations.
Hazem El-Beblawi, a former finance minister and former deputy prime minister for four months during the transitional period, was appointed as the new prime minister on 9 July, and Mohamed ElBaradei, the former director of the International Atomic Energy Agency and leader of the National Salvation Front, was appointed as the vice-president of foreign affairs.