While the GCC’s commitment of $12bn in aid to Egypt has restored confidence that the country will meet its short term maturities, it is unlikely to significantly increase foreign investor confidence, economic analysts say.

Saudi Arabia, Kuwait and the UAE pledged financing packages to help support Egypt’s ailing economy as the country rebuilds after the ousting of former president Mohamed Mursi.

But a loan from the International Monetary Fund (IMF), which would be a signal to investors that the economy is progressing, is currently not under discussion with Egypt’s interim government.

“The foreign aid will likely go toward commitments the government has made, given Egypt’s need for almost $20bn of external funding - more if we see economic instability - and the decreasing likelihood of IMF aid at this point,” says Emad Mostaque, strategist at London-based Noah Capital Markets.

“The international funds that sold stocks in March haven’t been able to repatriate their funds yet, probably worth several hundreds of millions in dollars. At the moment hedge funds are the only ones not trying to get out.”

Egypt’s government is estimated to have over $40bn worth of foreign debt from imports of diesel, wheat and other commodities, in addition to over $30bn in domestic debt and plans to increase its lendings this year. The central bank’s foreign reserves fell to $14.9bn in June, representing less than three months of imports.

Moving forward, more changes will be needed to kickstart the economy, says Ahmed Abou el-Saad, chairman of Rasmala Egypt Asset Management.

“The [investors] that are now entering the market have a medium to long term view. I wouldn’t expect anyone to face problems, though on the other hand, Egypt can’t regain light traders back into market very soon because it is not an easy environment to work in.”

GCC aid and a potential IMF loan will not be enough for the economy to get back on track, he adds. “This is like putting a sick person on an oxygen mask - it will take another one or two years for the economy to normalise.”

Questions remain over the interim government’s willingness to include the Muslim Brotherhood and other political Islamist parties, which according to analysts could result in attempts to undermine the economy and the new regime if they are not addressed.

In the short term, though, the government will have enough funds not to fall into the danger zone, and the Egyptian pound is expected to remain steady after it depreciated more than 10 per cent this year. In the absence of aid analysts warned the currency could depreciate up to 20 per cent this year, but that is no longer expected following GCC aid announcements.

“Egypt needed roughly $8bn to keep foreign exchange (FX) reserves stable over the next 18 months, though this would depend on the central bank’s FX management framework as well”, says analyst Jean-Michel Saliba of Bank of America Merrill Lynch in a report. “The Egyptian pound is unlikely to be devalued in the near term and the curve is still inverted with high yields in the front end.

“The next milestone in the political transition period would be the speedy appointment of a technocratic cabinet that would restore business confidence and re-engage with the IMF.” However, “even if the appointment of a technocratic cabinet increases the chances of reengaging with the IMF, reforms remain difficult because of large fiscal slippage this fiscal year, upcoming elections and elevated socio-economic grievances.”