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Egypt secures USD 12 billion in aid - ASHARQ AL-AWSAT English Archive
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An Egyptian vendor adjusts a price tag that identifies dates named after Egypt's Defence Minister Abdelfatah al-Sissi that are sold for 30 Egyptian pounds (five dollars) behind dates (c-front) named after toppled president Mohamed Morsi that are sold for four Egyptian pounds (0.5 cents) at his shop in the working-class Saida Zeinab district in Cairo on the second day of the holy month of Ramadan July 11, 2013.  (AFP PHOTO/MARWAN NAAMANI)

An Egyptian vendor adjusts a price tag for dates named after Egypt’s defence minister, Abdel-Fattah El-Sisi, that are sold for 30 Egyptian pounds (five dollars), behind dates (center front) named after toppled president Mohamed Morsi that are sold for four Egyptian pounds (50 cents), at his shop in the working-class Saida Zeinab district in Cairo on the second day of the holy month of Ramadan, July 11, 2013. (AFP PHOTO/MARWAN NAAMANI)

Cairo, Asharq Al-Awsat—Kuwaiti officials announced an aid package to Egypt worth USD 4 billion yesterday, bringing up the total aid pledges secured so far to USD 12 billion following pledges from Saudi Arabia and the United Arab Emirates.

The Kuwaiti aid package comprises USD 2 billion to be deposited in the Central Bank of Egypt, a USD 1 billion grant and USD 1 billion worth of oil products, Kuwait’s state minister for governmental affairs revealed on Wednesday.

Basnat Fahmi, an Egyptian banking expert, said that the aid will build up the country’s dwindling foreign exchange reserves, and in turn halt the continuous decline of the Egyptian pound against the US dollar. It will also help tackle the budget deficit in the country, given that Egypt imports more than half of its necessary basic commodities.

Rashad Abdo, an economics professor at the American University in Cairo, said that aid packages will stimulate the ailing economy of Egypt and help to resolve the country’s financial crisis.

However, Abdo stressed that foreign aid will only provide a short-term solution. “The new government should use the money pledged to redress the economic imbalance and boost national production,” he said.

Hamdy Samir, an adviser to the Egyptian minister of finance, said that aid will prompt foreigner investors buy debt instruments, a move that will cut the cost of government borrowing.

Mohammed Abdul Mutalib, an Egyptian economic analyst, said that the USD 12 billion aid will restore the trust of foreign investors, particularly Arabs, in the Egyptian economy. He also added that credit rating agencies will be cautious about downgrading Egypt’s credit rating given that aid pledged so far is enough to help stabilize the country’s economy for the time being.

Abdul Mutalib predicted that this will facilitate the government’s negotiations with the International Monetary Fund.

After years of stagnation, Egypt has experienced severe economic problems since the January 25, 2011, revolution, with declining growth rates, growing budget deficits and soaring rates of unemployment, scaring foreign investors, particularly Arabs.

During its year in office, the government of deposed president Mohammed Mursi managed to secure aid pledges totaling an estimated USD 12 billion in grants, deposits and debts, with Qatar alone offering USD 8 billion.

In related news, the Central Agency for Public Mobilization and Statistics (CAPMAS) in Egypt has announced that inflation rate during June has increased by 1 percent compared to May. Moreover, the annual inflation rate has grown by 10.9 percent (137.1 points.)

Abu Bakr El-Gendi, the head of the CAPMAS, announced that last month saw people hoarding essentials amid rumors of severe food shortages owing to the current political turmoil in the country and the start of the Muslim holy month of Ramadan.

Gendi said that food prices have increased by 2.3 percent during this month compared to last month. He ascribed the increase in food prices to the fuel crisis that has lately gripped the country.