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Saudi Arabia, UAE, Kuwait strong backers of Egypt’s economy

Overview of Gulf aid to Egypt in the new era


EEDCGulf countries, especially Saudi Arabia, the UAE and Kuwait, have been strong supporters of Egypt since the ouster of Islamist President Mohamed Morsi in July 2013. The total financial aid Egypt has obtained from these countries since that time until the end of 2014 totals $23bn, according to Minister of Investment Ashraf Salman.

The nature of aid packages had differed as follows:

 

Egyptian President Abdel Fattah Al-Sisi previously met with Saudi King Salman Bin Abdulaziz on March 2015 to discuss and promote bilateral ties between both countries (Photo Presidency Handout)
Egyptian President Abdel Fattah Al-Sisi previously met with Saudi King Salman Bin Abdulaziz on March 2015 to discuss and promote bilateral ties between both countries
(Photo Presidency Handout)

Saudi Arabia

Following the ouster of Morsi in 2013, Saudi Arabia provided Egypt with a $5bn aid package in the form of non-refundable grants, deposits and petroleum products. The Saudi aid was divided into $1bn in cash, a five-year $2bn interest free deposit at the Central Bank of Egypt (CBE), and $2bn in the form of petroleum products.

However, this was not the beginning. Saudi Arabia has been a strong backer of Egypt economically as it had pledged a number of packages following the 25 January Revolution. It included soft loans from the Saudi fund worth $500m for financing development projects in Egypt in different sectors. These included housing, water, irrigation, sanitation, supply, electricity, energy, health and a credit line to finance non-oil products worth $750m.

Saudi Arabia has also provided $500m as a grant to bridge the budget deficit in May 2011, and a further $500m as treasury bonds and bills in June 2012.

In addition to this, it has also provided a deposit of $1m to the CBE in May 2012. A sum of $1.45m was also provided by the Saudi Fund in the Egyptian Development Programme supervised by the Ministry of International Cooperation.

After the 30 June protests in 2013 that demanded Morsi’s withdrawal from power after one year in office, the government announced the completion of the Egyptian-Saudi electrical linkage project. It would allow the two countries to share power during peak periods and to benefit from discrepancies in peak consumption periods in the two countries. The $1.6bn bilateral deal was said to enhance domestic industry and offer indirect employment opportunities in both countries.

The latest aid provided was in November 2014 when the Egyptian government signed three agreements with Saudi Arabia. These agreements would see the latter provide $350m for electricity projects and commodity export to Egypt, according to Prime Minister Ibrahim Mehleb.

The three agreements included two agreements totalling $100m for the financing of two electricity stations projects in north Egypt, at western Damietta and El-Shabab. A funding agreement has also been reached between a Saudi fund and the General Petroleum Authority, worth $250m of Saudi exports to Egypt.

 

Kuwait

Kuwait was also amongst the first countries to congratulate Egypt on Morsi’s ouster, as it had pledged a non-refundable grant of $1bn. It also pledged a five-year $2bn deposit to the CBE and $1bn worth of petroleum products.

In September 2013, the CBE announced that it had received the $2bn Kuwaiti deposit. A month later, Kuwait said that it will allow Egypt a five-year period, rather than an initial one year, to return the $2bn deposit.

In 2014, relations strengthened as Kuwaiti investments in Egypt amounted to $2.8bn, with bilateral trade between both countries increasing by 32% that year.

In March 2014, Egypt’s interim government signed two agreements with the Kuwaiti-based Arab Fund for Economic and Social Development (AFESD) to finance projects in the electricity sector. The AFESD also signed a $50m loan agreement with the state-owned Social Development Fund (SFD) to finance small and micro enterprises.

In April 2014, Kuwait’s national oil group announced that it would provide Egypt with 85,000 barrels of crude oil per day, under a new contract boosting supplies from Kuwait by 31%. It added that the Kuwait Petroleum Corporation (KPC) will also increase its supply of diesel and jet fuel to 1.5m tonnes per year, up from 860,000 tonnes previously. In November, Kuwait was said to have granted Egypt $1bn, however, this was met with contradicting responses from government officials.

The most recent aid was in December when the Kuwait Fund for Arab Economic Development (KFAED) agreed to loan Egypt approximately $102m for a power plant project located west of Cairo. The fund has also participated in financing the upgrade of the Assiut power plant. Egypt has had very strong cooperation ties with the KFEAD since 1964, with the fund providing Egypt with 38 loans totalling approximately $2.4bn.

 

United Arab Emirates

The UAE was also among the first Gulf countries to announce its assistance to Egypt’s 30 June protests. In July 2013, it pledged a $3bn aid package to Egypt, comprised of a $1bn grant and a $2bn interest-free deposit at the CBE. The UAE also provided seven shipments of fuel worth $225m.

In September 2013, the UAE’s Crown Prince and Deputy Supreme Commander of the armed forces, Mohammed bin Zayed Al-Nahyan, pledged $2bn in additional aid to Egypt as deposits and grants. In October of the same year, the two parties signed an agreement valued at $4.9bn.

In November 2013, Minister of State for Local Development Adel Labib said the UAE allocated around EGP 1.8bn to finance 135 water sanitation projects in nine governorates in Egypt. Egypt received approximately 25% of the total as a first instalment to help complete these projects before the end of 2014.

UAE has also funded the Egypt’s second stimulus package through a $2.8bn (EGP 20bn) financial assistance, that was signed in 2013 to finance development projects.

Amongst the latest financial support was in November 2014, when the UAE contributed to funding Ayady Company, which was founded with EGP 10bn in capital. Of this capital, Egypt has paid EGP 2bn and the other EGP 8bn was funded by the private sector. In an interview with Daily News Egypt in November, Minister of Planning Ashraf El-Araby said Egypt is also targeting $200m from the Khalifa Fund as investments in this company.

The support has continued in 2015, with a UAE-based firm submitting a proposal in February to develop the efficiency of seven thermal power stations in northern Egypt, according to First Undersecretary of the Ministry of Electricity.

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https://www.dailynewsegypt.com/2015/03/14/saudi-arabia-uae-kuwait-strong-backers-of-egypts-economy/
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