CAIRO (AP) — Saudi Arabia on Wednesday announced a $5 billion aid package to cash-strapped Egypt, where the economy is under mounting pressure, in part because of the economic fallout from Russia’s war on Ukraine.
The state-run Saudi Press Agency said the funds, deposited in Egypt’s Central Bank, are part of Saudi Arabia’s “tireless efforts” to support Egypt, the Arab World’s most populous country. The money will be added to Egypt’s foreign reserves, which stood at around $41 billion by the end of February, and help with critical imports and propping up the sliding national currency.
The new package came less than two weeks after the Central Bank of Egypt raised its key interest rate and allowed the Egyptian pound to plunge to over 18.30 to the dollar — from an average of 15.6 pounds for $1.
The moves have taken a heavy toll on poor and middle-class Egyptians who have faced price hikes since the government embarked on an ambitious reform program in 2016 to overhaul the country’s battered economy. The reforms were agreed on with the International Monetary Fund for a $12 billion bailout.
Economists have said the measure were likely signs that the government is working to secure another financing package from the IMF. The global lender has said that Egypt asked for its help to “implement their comprehensive economic program” but did not say whether the talks involve a new loan.
Allies Saudi Arabia and the United Arab Emirates have injected billions of dollars into Egypt over past years, helping shore up its economy battered by years of turmoil.
Egypt’s economy is under fresh pressure amid an inflationary wave triggered by the coronavirus pandemic and Russia’s war in Ukraine, which has hiked oil prices to record highs.
The war has also impacted the vital tourism sector, as most foreign visitors to Egypt’s Red Sea resorts have come from Russia and Ukraine. Egypt is also the world’s largest importer of wheat, most of it coming from Russia and Ukraine.
On Tuesday, the Egyptian government said energy-rich Qatar would invest $5 billion in Egypt, the latest sign of increasing improvement in ties between the two nations since Egypt and three Gulf nations ended a diplomatic dispute with Qatar last year.