Qatar helps Egypt stave off IMF loan

The move reinforces Qatar's standing as a supporter of Islamists in the Middle East. Elizabeth Dickinson reports

Qatar's prime minister announced US$3 billion (Dh11.02bn) in aid to Egypt yesterday, reducing pressure on Cairo to finalise a $4.8bn loan from the International Monetary Fund that would require cuts in subsidies.

The deal stands to further strengthen ties between the two countries, and it bolsters Qatar's reputation as a financial backer of Islamist governments in the region.

"We reached an agreement to add more bonds from the Qatari government in the amount of $3bn (Dh11bn). During the coming days, we will discuss the details of issuing those bonds," Sheikh Hamad bin Jassim bin Jabr Al Thani said after meetings in Cairo with the Egyptian prime minister, Hesham Qandil.

The emirate also promised to supply Egypt, which had been facing the prospect of power cuts, with natural gas this summer during peak demand. Sheikh Hamad did not elaborate on the value of the shipments.

Egypt's Islamist president Mohammed Morsi took office in June 2012 and since then, Qatar's aid to Egypt has reached $8bn, the majority of which has come in the form of bonds to bolster the central bank.

Egypt has seen its foreign currency reserves dive in recent months amid falling receipts from tourism and foreign investment. Last month, the central bank announced Cairo had just $13.4bn left in its coffers compared with $36bn two years ago.

Yesterday's announcement was preceded by three days of meetings between Qatari officials and the Egyptian central bank governor, Hisham Ramez.

Qatar's aid could buy Egypt time in its negotiations with the IMF, whose team has been in Cairo since last week in hopes of finalising a deal. The current package would provide Egypt with $4.8bn in loans but would require Egypt to lower fuel and food subsidies, which the financial institution argues are inefficient and wasteful of Cairo's limited budget.

Western lenders and analysts have also argued that the loan is crucial to Egypt's financial future, offering investors assurances about the country's ability to undertake fiscal reform.

Cash injections from Qatar, meanwhile, will likely feed a growing backlash in Egypt over Doha's growing role in the country's post-revolution economy. Many have worried that Qatar has attached strings to its aid, such as privileged investment opportunities.

At their most sinister, those rumours included media reports that Doha was secretly purchasing the Suez Canal and leasing the pyramids.

Laughing off allegations following last month's Arab League summit in Doha, Sheikh Hamad told reporters that the stories were "fabrications" created by people taking advantage of the media in Egypt.

"They said we will rent the pyramids [for $200 billion]. I don't think that $200 billion is a good deal for renting pyramids only for five years," he said jokingly at the summit's press conference in late March.

But a flurry of Qatari investments in Egypt have been mired in regulatory objections.

Egypt's financial regulator is holding up a proposed joint venture between QInvest, majority owned by Qatar Islamic Bank, and Egypt's EFG Hermes, a leading Middle East investment bank, which will expire if not approved by May 3.

Kwok W Wan, an editor at Argus Media, which publishes analysis of the energy market, said that gas exports to Egypt could prove to be a business venture for Qatar, which has sought to expand its roster of long-term natural gas contracts. Doha's current clients in Europe and Asia have begun shifting towards shorter-duration contracts.

"New Egyptian gasfields have not started up as expected," he said.

* With additional reporting from Reuters