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Egypt said to get US$2b Saudi deposit in IMF deal boost

Thursday, October 13, 2016 - 13:42
10-40086360 - 04_10_2016 - FILES-US-IMF-WORLD-ECONOMY-GROWTH.jpg
Egypt has received a US$2 billion deposit from Saudi Arabia, an Egyptian central bank official said, bringing it closer to securing a US$12 billion loan from the International Monetary Fund.

[CAIRO] Egypt has received a US$2 billion deposit from Saudi Arabia, an Egyptian central bank official said, bringing it closer to securing a US$12 billion loan from the International Monetary Fund.

The official, who asked not to be identified because the information isn't yet public, didn't specify when Egypt received the funds. Egypt's net foreign reserves rose by US$3 billion in September to US$19.6 billion.

Officials at Saudi Arabia's finance ministry and central bank couldn't immediately be reached for comment outside regular office hours on Wednesday.

Egypt is seeking as much as US$6 billion from bilateral creditors to meet the conditions for the IMF's board to consider the loan, which officials hope will help restore investor confidence and end a foreign currency shortage.

Confirmation of the deposit may help to end speculation that recent tensions between the two countries would prevent the Saudi payment, putting the IMF loan - and other measures designed to overhaul the economy - at risk.

The news eases concerns that the political rift "would delay the build up of a foreign currency buffer necessary to float the Egyptian pound and close the IMF deal," said Hany Farahat, senior economist at CI Capital, a subsidiary of Commercial International Bank, in Cairo.

Egypt's "migration to a managed floating currency regime in the coming weeks is now more feasible," he said.

SAUDI SUPPORT

The Market Vectors Egypt exchange-traded-fund gained after the report, trading up 1 per cent at 2.13pm in New York. 

Following the 2013 ouster of Islamist President Mohamed Mursi, Saudi Arabia and other Gulf Arab nations offered billions of dollars in aid to buoy a military-backed government cracking down on the Muslim Brotherhood, a group viewed as a threat to the Gulf monarchies.

The late Saudi king, King Abdullah, privately told US Secretary of State John Kerry in 2014 - the year former army chief Abdel-Fattah El-Sisi was elected president - that Egypt was too important to be allowed to fail.

But with Egyptian authorities already struggling to pass a maritime border pact with its long-time backer, a rare Saudi public rebuke of Cairo at the United Nations over Syria fueled doubts about Saudi Arabia's commitment to supporting Egypt.

At the UN Security Council session during the weekend, Egypt voted in favour of a resolution calling for the halt of Russian bombing, which was also supported by Saudi Arabia.

When it failed, Egypt backed a counter motion from Russia, which also didn't pass. The Saudi envoy said it was "painful" that the position of non-Arab countries was closer to the kingdom's than Egypt's.

The spat also coincided with a decision by Saudi Aramco to halt this month's petroleum supplies to Egypt.

Before the UN dispute and the Aramco announcement, a senior IMF official said the fund's board may approve the loan to Egypt by early November.

Egyptian stocks gained 6.2 per cent last week on signs a deal was on track.

By the time trading resumed on Sunday, that optimism had evaporated.

The benchmark EGX30 index fell for a third day on Wednesday, and the Egyptian pound this week slumped to a record low 14.78 per dollar in the black market - compared to the official rate of 8.88.

The Egyptian media reacted strongly to the tensions.

Pro-government television presenter Ahmed Mousa said Egypt doesn't "owe bills" to anyone. "A Brotherhood on the Line!" was a headline in the privately-owned Al-Watan newspaper, which compared Saudi Arabia's earlier "true support" under King Abdullah with its new "conditional giving."

Still, the Saudi deposit wasn't the only positive indication about the two countries' relations on Wednesday. Saudi-owned Al Arabiya television reported that the Saudi ambassador to Egypt flew to Riyadh to arrange for a visit by a high-level Egyptian delegation within the coming days.

BLOOMBERG