By Una Galani
DUBAI, Jan 9 (Reuters Breakingviews) - Timing matters for Qatar's $2.5 billion lifeline to Egypt. The generous aid package doubles the Gulf state's financial assistance to the country and underscores Doha's support for the Muslim Brotherhood-led government. It's unclear, though, exactly when the funds were received. Egypt might be in deep trouble, or sighs of relief could be in order.
The country is at risk of a full blown currency meltdown. The pound has fallen 5 percent against the dollar since Dec. 30. While official data showed that foreign reserves held steady during December, the central bank was sufficiently worried to announce that the amount had reached a "critical limit". It introduced foreign currency auctions and fresh capital controls.
Qatar's Prime Minister Sheikh Hamad bin Jassim al-Thani added fuel to the fire yesterday by asserting that, "We don't announce except after doing". Egypt's financial experts are wondering if that means the emirate's funds actually reached Cairo in December. The early arrival of the extra dollars would help explain why foreign currency reserves held steady during a month of constitutional crisis and rampant fear of political chaos.
However, if the government received the full $2.5 billion in December, on top of a separate $500 million aid inflow from Qatar, and reserves did not rise from the $15 billion in November, then Egyptians must have been rushing to get their hands on dollars. The possibility is alarming. If citizens are scooping up dollars, the government might have trouble making January's external debt payments, including $700 million to the Paris Club.
The hope is that Qatar's aid has just arrived, in January. That would mean that funds are still readily available to the Brotherhood. Having a limited backstop to the currency will ease the pressure on the government to make unpopular reforms ahead of elections and give it room to finalise a critical $4.8 billion loan from the International Monetary Fund.
For the moment, though, there is only confusion about just how well funded Egypt really is. The doubts make it harder for outsiders to deal with the Islamist government which Qatar wants to support. More transparency would be helpful for everyone.
- Qatar said on Jan. 8 that it had lent Egypt another $2 billion and given it an extra $500 million outright.
- The government said it expected an International Monetary Fund technical committee to visit Cairo in two to three weeks' time to resume talks on a $4.8 billion loan.
- "There was an initial package of $2.5 billion, of which $0.5 billion was a grant and $2 billion a deposit", Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani told reporters, referring to the aid it has provided since Egypt's uprising two years ago.
- "We discussed transferring one of the deposits into an additional grant so that the grants became $1 billion and the deposits doubled to around $4 billion", he said of the new aid after meeting Mursi.
- Hamad added that the new Qatari grants and deposits with Egypt's central bank had all arrived.
- "Some of the final details with the deposits are being worked on with the technical people, but the amount is there", he said.
- The Egyptian pound has fallen around 5 percent against the dollar since Dec. 30 to 6.48.
- Reuters: Qatar throws Egypt $2.5 bln lifeline to prop up pound
- For previous columns by the author, Reuters customers can click on
(Editing by Edward Hadas and Sarah Bailey)