(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
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.
CONTEXT NEWS
- 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
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(Editing by Edward Hadas and Sarah Bailey)