Talks between Egypt and Saudi Arabia for the second installment of a $1.5bn loan agreed in April last year have stalled, according to a number of local news outlets that have quoted sources at the Central Bank of Egypt (CBE).

Other sources at the CBE have confirmed to MEED that the second tranche, which was expected this month, has not been deposited with no internal communication regarding the status of the loan.

“We are not sure what is happening with the second installment,” said one source.

Cairo received an installment of $300m in August last year. The $1.5bn loan was agreed during King Salman bin Abdulaziz al-Saud’s state visit to Egypt in April 2016. The loan was issued to help the development of Egypt’s Sinai region, which has been troubled with jihadi insurgents since the ousting of former president Mohamed Mursi.

Relations between Cairo and Riyadh, which have involved the kingdom pumping billions of dollars into the Egyptian economy, have been strained in recent months. This was exasperated by a recent court ruling in Egypt to anull the government’s decision to cede the sovereignty of two Red Sea islands to the Saudi Arabia.

Saudi Aramco recently stalled the delivery of 700,000 tonnes of petroleum products to Egypt, part of another agreement between the two countries also in April last year. Although neither government has released an official statement regarding the reason behind the stalled oil deliveries, it is understood to be related to Egypt’s decision to back track on Red Sea islands.

Egyptian diplomats also frustrated Riyadh in late 2016 when Egypt voted in favour of a Russian-backed UN resolution on the conflict in Syria. The resolution opposed Saudi Arabia’s position, which opposes the Moscow and Tehran-backed regime of Bashar al-Assad.