After short negotiations, Qatar has agreed to buy Egyptian bonds worth $3bn, part of an aid package that will help Egypt from sinking into financial turmoil. The announcement was made after an unexpected trip to Egypt by the Qatari premier Sheikh Hamad bin Jassem al-Thani, and has surprised many observers.
Qatar’s bond purchase comes on top of an already agreed aid package worth $5bn. Egypt will receive from its oil-rich neighbour an outright grant of $1bn and $4bn in bank deposits. The sheikh, whose government is the main financial backer of Mohamed Morsi’s Islamic-led government of Egypt, reiterated that Qatar did not expect anything in return for the aid package.
“We have agreed to add Egypt government bonds worth $3bn,” said al-Thani in a press conference. He also spoke of “the importance of relations between Egypt and Qatar continuing at the same pace and the same momentum.” Qatar is already one of the biggest foreign investor in Egypt, and investments amount to about 18 to 20 percent of all FDI.
It has been reported that some Egyptians are deeply sceptical of Qatar’s motives for offering such vast sums of money. There have been accusations of Qatar using the loans to politically influence Morsi’s government. “Sadly, the media are reporting positive things negatively,” said al-Thani. “But this will not affect Qatar’s way of dealing with our brothers in Egypt.”
Egypt is currently in talks with the IMF over an almost $5bn loan, part of a financing programme that will help Egypt’s economy through the crisis. Local authorities believe that the IMF loan will help restore confidence in the Egyptian market, which has struggled with political turmoil since violent demonstrations ousted long-serving President Hosni Mubarak in 2011. The country’s foreign currency reserves are severely depleted and stand at just $13.4bn; down from $36bn held before the uprising. The country is also suffering from poor credit ratings even as its budget deficit continues to soar.
There are concerns that the internal lender’s fiscal requirements for approving the loan will cause social tensions. The IMF delegation currently visiting Cairo will examine the country’s recent steps towards economic liberalisation and the final size of the loan may still change, according to IMF officials.
It has also been reported that Libya has offered Egypt an additional $2bn five-year, interest free loan to help alleviate economic tensions plaguing the country.