Egypt’s central bank gets cash infusion from UAE
London - The United Arab Emirates has deposited $1 billion in the Central Bank of Egypt, which is in the process of introducing significant austerity measures to revive its economy.
The deal signed by Director- General of the Abu Dhabi Fund for Development (ADFD) Mohammed al-Suwaidi and Egypt Central Bank Governor Tarek Amer comes as Cairo readies itself to meet International Monetary Fund (IMF) loan obligations.
“[The deposit] demonstrates the UAE’s commitment to support our long-term partners, ensuring their economic growth and stability and is a landmark agreement, which will make an immediate difference to the Egyptian economic system,” Suwaidi said.
IMF representatives and Egyptian officials reached a tentative deal that allows Egypt to receive $12 billion over a three-year period. In return, Cairo must reform the Egyptian economy.
A statement on the official UAE news agency said: “This support comes within the framework of strategic cooperation and coordination between the two countries and out of the UAE’s unwavering stand in support of Egypt and its people to promote the development process, as well as the recognition of Egypt’s central role in the region.”
Egyptian economic expert Khalid al-Shafey said the UAE pledge would support the Egyptian government’s economic reform programme.
The $1 billion deposit into Egypt’s central bank, Shafey said, would “contribute to creating a state of decline in the price of the US dollar on the black market. It will also help, along with the approaching first instalment of the IMF loan, in pushing forward the overall recovery of the Egyptian economy”.
Observers said Gulf states are gambling on the recovery of the Egyptian economy and national security until it can return to its role as a major regional power, particularly in light of regional forces, such as Turkey and Iran, interfering in Arab affairs.
Egypt is suffering after-effects from the “Arab spring” on its economy and security. It is grappling with a dollar shortage and dwindling foreign reserves. The government has been preparing the Egyptian public for major economic reform measures, which will include cutting subsidies.
Egypt will cut fuel subsidies over the next three years and reduce spending on them by nearly 43% in the 2016-17 budget, officials confirmed.
Egyptian President Abdel Fattah al-Sisi said officials have waited too long to implement essential economic measures and the future of the country was at stake.
“The size of the challenges is beyond imagination and the responsibility for coping with them doesn’t fall solely on my shoulders but is a responsibility shared by Egyptians as a whole,” Sisi told Al- Ahram newspaper.
Under the conditions of the IMF loan, Egypt must secure $6 billion from bilateral creditors before the loan can be approved. The UAE was the first to pledge its support.