Saudi Arabia, the United Arab Emirates (UAE), and Kuwait have pledged a total of $12 billion in aid to Egypt so far. The funds will provide some relief for the Egyptian economy, which is in shambles after years of unrest and mismanagement.
According to Bloomberg, foreign currency reserves – vital for the import of basic goods and for stabilizing the Egyptian pound – were dangerously low at the end of June, standing at only $14.9 billion.
“Right now the Egyptian economy is in really bad shape,” says Dr. Hafez Ghanem, a senior fellow at the Brookings Institute. “Aid from … the Gulf would ease these kinds of constraints.”
Yesterday the UAE promised Egypt a $1 billion donation as well as a $2 billion interest-free loan, reports the Khaleej Times, a UAE newspaper. This was followed the same day by a $5 billion aid package from Saudi Arabia. The Saudi aid consists of a $2 billion direct deposit to Egypt’s central bank, $1 billion in cash, and an additional $2 billion worth of oil.
Today Kuwait announced that it too would provide aid to Egypt in the form of $4 billion worth of money and oil, reports Reuters.
Kuwait has in the past cooperated with Riyadh and Abu Dhabi, pledging financial aid for Gulf neighbors hit by social unrest such as Bahrain and Oman, but also for Morocco and Jordan.
The aid from the three Gulf Arab oil producers is expected to help Egypt avoid a balance of payments crisis and overcome fuel shortages that partly stoked public anger against Morsi.
These donations mark a shift in attitude toward Egypt now that the Muslim Brotherhood’s Mr. Morsi is out of power. The Gulf monarchies were typically antagonistic towards the Brotherhood because of their ambitions for regional power, says Ghanem.
“[The Gulf states] in general support Sunni Muslim organizations. However, for a long time there has been a mistrust of the Muslim Brotherhood, because [the Brotherhood] wants to create a Muslim caliphate. They have ambitions beyond Egypt,” he says.
The aid packages are a sign from the Gulf states that they approve of the military-led coup that removed Morsi from power and appointed Adly Mansour as the interim president.
Egypt’s economy was already in crisis when Morsi was elected president in June 2012, more than a year after longtime dictator Hosni Mubarak was ousted in a popular revolt, writes Gulf News, a UAE newspaper. Under Morsi’s year-long rule, the Egyptian economy only deteriorated further.
“Morsi and his Muslim Brotherhood, in economic terms, were worse than Mubarak,” said Rashad Abdu, the head of Cairo-based Egyptian Economic Forum. “The Brotherhood members are mainly merchants with no clear economic vision or managerial skills. So, Egypt’s economic problems have gone from bad to worse at their hands,” Abdu told Gulf News.
The new aid coming from the Gulf outstrips the $1.5 billion that Egypt receives from the US each year. But Ghanem says the strategic character of US aid means the new influx of Gulf aid is unlikely to change the power dynamic in the region.
Since Egypt began receiving substantial aid from the US after its 1979 peace treaty with Israel,most of the money has been going to the military, reports The Washington Post. Since 1987, the Egyptian Armed Forces have received $1.3 billion every year, while the rest of the aid goes towards economic and social projects. In return for US aid, Egypt has maintained its peace with Israel and given the US preferential access to the Suez Canal.
“The US’s influence goes far beyond simply numbers of dollars,” says Ghanem.