UAE oil deal for Egypt amid signs of recovery
The UAE has agreed to supply Egypt with 63 billion Egyptian pounds (Dh31.73bn) worth of oil products over the coming year, a continuation of aid efforts that began last year to support Egypt’s new government as it seeks to rebuild the economy.
The UAE, together with Saudi Arabia and Kuwait, have played a major role in propping up Egypt’s economy in the wake of political turmoil, with more than US$20bn in various forms of aid and investment since July 2013. As part of that package, Saudi Arabia supplied oil aid since the start of the year, but with that coming to an end in August, the UAE has stepped in and agreed to supply Egypt with oil products over the coming year, starting this month.
Egyptian press, quoting the ministry of petroleum, reported that the deal will be treated as a loan on favourable terms, with Egypt pledging to repay the amount in four years plus interest of between 2 and 3 per cent.
The fact Egypt is agreeing to repayment reinforces broader signs of economic recovery since the removal last year of the Muslim Brotherhood-led government and the reinstatement of the previous regime under the president Abdel Fattah El Sisi.
The new government has been pursuing a radical economic programme, including structural reforms such as cutting fuel and food subsidies, and “every milestone of the roadmap that has been achieved is feeding confidence,” said Mohamed Abu Basha, a Cairo-based economist for EFG Hermes. “The major milestone in terms of recovering confidence was the budget this year.” The Egyptian fiscal year started in July.
“There remain a lot of things to deal with – foreign exchange shortages, energy shortages, parliamentary elections, Libya. There are overhangs and obstacles but with the July fiscal measures there is more belief that this economy is about see an upturn,” Mr Abu Basha added.
Egypt has also received financial aid from the US and the European Union, with the latter set to deliver a further package of €500 million (Dh2.41 billion) as soon as the IMF gives its blessing to Egypt’s reform programme.
In a report in April, the IMF wrote: “Financial support from the Gulf countries has provided a breathing space, but Egypt faces a difficult combination of persistently low growth, a high budget deficit and external vulnerabilities.”
Despite signs of improvement and the return of some foreign investment, “delayed implementation of the political roadmap and persistence of violence continue to be the main risks,” the IMF warned.
Nonetheless, the IMF has praised the government’s latest efforts: Masood Ahmed, the director of the IMF’s Middle East and Central Asia Department, said last month: “Egypt has applied hard and brave economic reforms.”
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Updated: August 31, 2014 04:00 AM