Qatar has doubled the amount of financial aid it has given to Egypt to $5bn as the Gulf state continues to build ties with the Islamist regime of President Mohamed Mursi.
The package comes at a crucial time for Egypt, where the pound has fallen to record lows against the dollar and a planned $4.8bn support package from the Washington-basedIMF, considered vital to support the country’s struggling economy, has been beset by delays.
Qatari Prime Minister Sheikh Hamad bin Jassem al-Thani said on 8 January in Cairo that the latest financial support is split between a $2bn loan and $500m in grants, bringing the total provided to $4bn in deposits with the Central Bank of Egypt, and $1bn in grants.
The IMF is set to resume talks about its aid package in late January, but there is growing skepticism about the appetite of Mursi and the Freedom and Justice Party to implement the kind of fiscal reforms demanded as a condition of the loans. Mursi has already suspended a law that raised taxes and cut expenditures as a precondition of the IMF package.
“The government may try to persuade the IMF to water down or postpone some of these reforms even further, thinking they have enough buffers now,” said the UK’s Barclays in a report.
There is little public support for the kind of measures envisaged by the IMF though, and after only just settling one political crisis over a new constitution, the government is expected to have little appetite for starting a new one through a range of unpopular economic reforms.
“An agreement with the IMF could unlock further hard currency inflows of as much as $10bn,” says Raza Agha, chief economist for the Middle East and Africa at Russia’s VTB Capital. “This said, we expect the Egyptian government to have a difficult time meeting the fiscal objectives of the programme.”