Egypt uses UAE funds for second stimulus package
CAIRO // Egypt’s interim government unveiled its second stimulus package on Monday, which will inject 33.9 billion Egyptian pounds (Dh18 billion) into the economy, with most of that money coming from aid pledged by the UAE.
Previously the finance ministry said Egypt planned to spend around 30 billion Egyptian pounds. The first stimulus package, amounting to 30 billion pounds, was launched in August.
Ahmed Galal, the finance minister, said on Monday that the new spending would be financed mostly by the UAE, one of the Gulf countries that has pledged billions of dollars in support for Egypt.
Three years of political unrest since a popular uprising ousted Egyptian president Hosni Mubarak have scared away investors and tourists, weighing on economic growth.
The army removed Islamist president Mohammed Morsi in July, triggering unrest.
Analysts say the army-backed authorities are anxious to get the economy moving to shore up public support and curb the scope for more unrest as the government moves along a political transition plan leading to elections this year.
Nearly 20 billion Egyptian pounds will be spent on development projects and 2 billion pounds would be directed towards developing a corridor around the Suez Canal under the second stimulus package, the finance minister statement.
Twelve billion pounds will go towards financing social programmes, including a rise in the minimum wage.
Meanwhile, Egypt’s oil minister, Sherif Ismail, has warned that the country will need to import an additional Dh36.7bn worth of petroleum products and secure significant natural gas supplies to meet energy needs for the summer.
Previous governments have struggled to cope with energy crunches, and Mr Ismail said this coming season would be no exception.
“The first estimate ... is that we will need to import petroleum products of around $250 million per month during the four summer months,” Mr Ismail said.
Failure to find a solution could frustrate Egyptians, who rioted in the past over long lines at gas pumps just before the army toppled Mr Morsi.
Egypt has said it received Dh14.7bn in fuel products from Gulf nations since Mr Morsi’s removal.
The growing population of 85 million has kept energy demand steadily rising so that it now outstrips the production of oil and gas from fields in the Western Desert, Nile Delta and offshore.
Compounding the problems, the government fell into heavy debt to foreign energy firms which Egypt needs to help it exploit gas reserves that could enable the country to end power cuts and bolster export income.
Instead, surging demand has caused Egypt to divert high levels of gas produced by foreign companies such as BG Group and promised to them for export.
Egypt’s energy troubles weigh heavily on the economy. Talk of cutting fuel subsidies that costing Dh55bn a year has produced limited results.
Successive governments have feared that raising energy prices could trigger unrest in a country where street protests have helped remove two presidents in three years.
Mr Ismail, an engineer who held senior posts at several state-run energy firms before his appointment as minister last July, said the interim government would take the first steps in a reform programme that would see subsidies cut by 25 to 30 per cent in five to six years.
“The subsidy issue is crucial,” he said, adding that increasing energy consumption and the government’s target of seven per cent economic growth required subsidy reform and efforts to diversify the energy mix.
“Ninety-five percent of energy consumed depends on crude oil and natural gas. The current energy mix doesn’t really work for Egypt, it is not secured, it is not economical, and it is not sustainable,” he said.
Updated: February 10, 2014 04:00 AM