UAE to deposit US$1b in Egypt central bank

[ABU DHABI] The United Arab Emirates agreed Monday to deposit US$1 billion into Egypt's central bank in a new show of support for President Abdel Fattah al-Sisi, state news agency WAM said.

The announcement comes as Egypt grapples with a dollar shortage and dwindling foreign reserves, and as Mr Sisi has been preparing public opinion for economic reform measures, including further subsidy cuts.

The US$1 billion deposit, which is for a six-year period, comes as part of the UAE's "unwavering position in supporting Egypt and its people" and in recognition of Egypt's "pivotal role in the region", WAM said.

Egypt has already received more than US$20 billion in aid from Gulf countries that supported the overthrow of Mr Sisi's Islamist predecessor Mohamed Morsi, but that has not stemmed the decline of its economy.

The UAE, which considers Morsi's Muslim Brotherhood movement to be a "terrorist" group, has been among the strongest backers of Mr Sisi's government.

In April, it allocated US$4 billion to support Egypt - US$2 billion in investment and another US$2 billion to be deposited at the central bank to support foreign exchange reserves.

Mr Sisi and the central bank have come under rising criticism amid an acute dollar crunch which has led to a rise in prices including of medicines, with hundreds of products becoming unavailable or hard to find.

Some Egyptian firms have also scaled back their business activity as they struggle to find dollars to import raw materials.

In March, the bank devalued the Egyptian pound by 14.3 per cent to 8.95 to the US dollar amid a shortage which has worsened in the past few months, with black markets offering the dollar at much higher rates.

This month, the International Monetary Fund said that it had reached an initial agreement to lend US$12 billion to Egypt, in a three-year deal which the government hopes will provide a lifeline to the North African nation.

AFP