Saudi Arabia and the United Arab Emirates have pledged a total of $8bn to Egypt to help prop up its ailing economy, highlighting the shake-up in regional political power after last week’s military coup in Cairo.
Riyadh has promised to send $5bn and Abu Dhabi $3bn in a mix of cash, central bank deposits and oil products, as the new Egyptian administration grapples to halt the slide in the pound and stave off a foreign exchange reserves crisis.
The funds are a much-needed “lifeline”, said Mohamed Abu Basha, an economist at EFG-Hermes, the regional investment bank. With foreign reserves standing at $14.9bn at the end of June and with $1bn worth of commitments to Paris club debtors in July, Egypt was dangerously close to dropping below three months of import cover, he said.
The promise of aid came as the interim authorities in Cairo sought to project a return to stability with the appointment of liberal economist Hazem al-Biblawi as prime minister and the issuance of a fast track plan that would return Egypt to civilian rule in months, a period that observers said was too optimistic.
But in a sign of the hurdles facing the relaunch of a new political process, both the Islamist Nour Party and the secular National Salvation Front rejected the new constitutional declaration issued by Adli Mansour, the interim president, saying that it was not what they had agreed to.
Nour said the declaration, which is to serve as Egypt’s constitution until a new charter has been adopted, failed to include all the relevant articles relating to Egypt’s Islamic “identity”.
The NSF issued a statement saying they were not consulted and that they object to the inclusion of some articles and the omission of others that they did not specify.
Jay Carney, US President Barack Obama’s spokesman, said on Tuesday that the White House is “cautiously encouraged” by the plan to return to democratically elected government. Mr Carney called for all parties to be included in the electoral process.
The commitments from the two oil-rich Gulf states dramatically underscore the impact of events in Cairo on the wider Middle East political order, with the UAE and Saudi Arabia delighted at the toppling of Mohamed Morsi, Islamist president, favoured by their neighbour Qatar.
Mr Obama spoke to the leaders of both Qatar and the UAE on Tuesday night and discussed the urgency for Egypt’s military to return control to a democratic, civilian government and the need to avoid more bloodshed.
Although the UAE and Saudi Arabia initially offered billions in aid to Egypt after the fall of the 30-year dictatorship of Hosni Mubarak in February 2011, Qatar played the role of chief Gulf financier as the political dominance of Mr Morsi’s Muslim Brotherhood movement grew in Cairo.
Only last week, before the coup, Egypt sold $1bn in bonds in a private placement to Qatar with a 3.5 per cent coupon, traders said. Qatar has also pushed ahead with commercial acquisitions including the purchase of Société Générale’s Egypt unit and a joint project to import liquefied natural gas with Egypt’s Citadel.
But in contrast to the warm welcome given by the UAE and Saudi Arabia to the toppling of Mr Morsi, and the installation of Mr Mansour as interim president last week, Doha has offered only a more measured promise to “continue to respect the will of Egypt and its people across the spectrum”.
Saudi Arabia will deposit $2bn in Egypt’s central bank, send a further $2bn worth of oil products and give $1bn cash, said al-Arabiya, the Saudi-backed pan-Arab television station.
The UAE will offer a grant of $1bn and an interest-free loan of $2bn, the state news agency in Abu Dhabi said, after Hisham Ramez, Egypt’s central bank governor, flew to the UAE capital for talks this week. A high-powered UAE delegation arrived in Cairo on Tuesday, including senior ruling family members Sheikh Hazza bin Zayed al-Nahyan, national security adviser, and Sheikh Abdullah bin Zayed al-Nahyan, foreign minister.
One person familiar with Saudi government policy insisted the Gulf aid to Egypt was not just a diplomatic tool, but also a recognition that the country was a linchpin of regional stability and was “too big to fail”.
“For a lot of people, it would look as if it is a political statement,” he said. “But this is also addressing a dire need.”
While the Saudi and UAE aid pledges may lift international investor sentiment about Egypt in the short term, there will also be caution until the funds are deposited. Past delays between promises and delivery of Gulf cash have left many observers sceptical about whether aid packages from the region are as significant as they sometimes initially seem.
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