Egypt looks to China and Saudi Arabia for financing gap

18 September 2016

A statement from the IMF says Cairo has had productive discussions with both countries

The $6bn-worth of bilateral financing that the IMF has told Egypt it needs in order to receive a $12bn loan is expected to be provided by Saudi Arabia and China.

Following meetings between the three countries at the recent G20 leaders’ summit earlier this month, the Washington-based IMF released a statement saying Cairo has had “very productive discussions” with authorities in China and Saudi Arabia regarding this matter.

In August, Egypt and the IMF signed a staff-level agreement for a $12bn loan. At the time it was agreed that the loan would be subject to Cairo’s ability to press ahead with economic reforms as well as secure an additional $6bn in bilateral financing.

Egypt has already approved a new law to adopt a value-added tax (VAT) of up to 14 per cent by 2017. The authorities have also pledged to phase out large state subsidies and further devalue the currency.

Earlier this month, Egypt received a $1bn deposit for the duration of six months from the UAE as Cairo looks to plug the $6bn financing gap.

Egypt’s central bank also recently announced that it has received the first $1bn installment of a $3bn loan from the World Bank.

It is understood that the World Bank loan and a $1.5bn loan from the African Development Bank do not count as part of the $6bn required.

Egypt’s foreign reserves have witnessed a drastic decline over the past few years as revenues from tourism, the Suez Canal and foreign investment fall. Foreign reserves exceeded $30bn in 2011, compared with $16.6bn in August this year.

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