Egypt to pay $1.5bn arrears to foreign oil firms
Cairo, December 4, 2013
Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement made at an investment conference will revive confidence in an economy battered by nearly three years of political upheaval.
"There is approval to pay $1.5 billion," Prime Minister Hazem el-Beblawi told the gathering designed to lure investment from Gulf Arab states and businessmen.
The oil-producing countries rallied behind Egypt after the army ousted President Mohamed Mursi of the Muslim Brotherhood in July, pledging billions of dollar in financial support.
Political uncertainty since a popular uprising ousted autocrat Hosni Mubarak in 2011 has frightened away tourists and investors, cutting tax revenues and foreign currency inflows.
That has increased pressure on the government to get oil firms investing again in extraction and exploration and lure both Arab and Western investors.
Egypt has repeatedly promised to repay arrears to the oil companies since Mursi's removal, which was welcomed by Gulf states fiercely opposed to the Muslim Brotherhood.
Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.
Financial disclosures by firms including BP PLC, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans and oil products.
Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country, a U.S. ally which has a peace treaty with Israel and controls the Suez Canal.
"HOW MANY FISH?"
Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. "Actually, we're not only counting on aid. We're counting on investments to come in."
Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, Finance Minister Ahmed Galal told Reuters: "I cannot tell beforehand. You go fishing, how many fish are you going to catch?"
Egypt badly needs private capital. Foreign direct investment fell to $3 billion in 2012/13 (July/June), compared with more than $10 billion a few years ago.
Qatar, which supported the Muslim Brotherhood, has been reluctant to invest in Egypt since Mursi's overthrow.
Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.
The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.
The economy grew a meagre 2.2 percent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 percent. Beblawi said the government aimed for economic growth of 3.5 percent in the fiscal year to end-June.
The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Ramez told the conference they had dipped slightly last month. The November figure is due out soon. – Reuters