Egypt budget and current account deficits – can Saudi Arabia bail out Cairo?
Arab News reports:
KSA pledges SR 30bn Egypt aid
17/12/2015
“JEDDAH: Custodian of the Two Holy Mosques King Salman has ordered that Saudi Arabia’s aid and investment package to Egypt should be increased to SR30 billion (US$ 8 bn) in the next five years.
The announcement was made by Deputy Crown Prince Mohammed bin Salman at a meeting with Egyptian Prime Minister Sherif Ismail in Cairo on Tuesday, said SPA (Saudi Press Agency)
Prince Mohammed said at the start of the meeting that King Salman ordered the increase in the package — to contribute to Egypt’s oil needs for five years and for an increase in traffic for Saudi ships in the Suez Canal.
According to a report in Bloomberg quoting Egyptian Investment Minister Ashraf Salman on Wednesday, the investment of SR30 billion would be through Saudi Arabia’s public and sovereign funds, with inflows beginning immediately. Egypt is also set to renew a deal to import Saudi oil products for five years on favorable terms, Ismail said.”
http://www.arabnews.com/featured/news/851651
This follows pledges of US$ 12.5 bn aid by Saudi Arabia, Kuwait, the UAE and Oman in March 2015, at an economic conference (EEDC) in Sharm el-Sheikh.
Will that be enough to rescue Egypt?
Let’s have a look at Egypt’s budget. In the previous post we found that Egypt’s oil production peaked in 1993. Declining and now stagnating oil production against an ever-growing oil demand of a ballooning population meant that Egypt is a net-oil importer since 2010. How did that impact on the budget? We use IMF data available from this website: http://www.imf.org/external/country/egy/index.htm
In the last years Egypt experienced turbulent times:
Feb 2011 Arab Spring, Mubarak resigns, New head of State Field Marshal Tantawi
June 2012 Morsi comes to power after winning presidential elections with 51.7% of votes
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