Qatar’s decision to extend $3bn of additional financial support to Egypt has temporarily boosted investor confidence in the North African country.
The UK-based rating agency Fitch Ratings has stated that the funding will be a “significant boost” to the country’s much-depleted foreign reserves, particularly in the continued absence of an agreement over the potential $4.8bn IMF loan.
The funding is also considered well-timed as the IMF agreement could be delayed until after the postponed parliamentary elections. The elections were originally to take place in late April, but are now set to take place in the second half of the year.
Fitch has recommended that the IMF package would be easier to implement after the elections, as a government with “a strong mandate” would be better positioned to conclude the deal.
If this were to be the case, Qatar’s support will be vital to keep Egypt’s economy going in the meantime.
Fitch warns that the Qatar funding does not make securing IMF funding any less urgent. Foreign exchange reserves fell below $13.5bn in March. If Egypt continues without IMF support the country will see the value of its currency fall further and will struggle to pay for imports of goods and food.
“An IMF deal remains vital for a sustained improvement in Egypt’s balance of payments, and to prevent uncontrolled currency depreciation,” a statement from Fitch read.
The agency continues to rate Egypt ‘B’ with a negative outlook.
Following the announcement of the Qatari funding, the retrial of former president Hosni Mubarak began on 13 April. Yet, as the trial opened, Judge Mustafa Hassan Abduallah who was meant to be overseeing the proceedings withdrew from the case. There were reportedly chaotic scenes in the court, with anti-Mubarak protesters demanding the execution of the former president.
Mubarak was sentenced to life imprisonment last June for conspiring to kill protesters during the 2011 revolution. Following an appeal, a retrial was announced in January this year.