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Sun 21 Jul 2013 04:19 PM

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Egypt receives $2bn loan from Saudi Arabia

Central bank governor says Saudi funds in form of a five-year interest-free loan

Egypt receives $2bn loan from Saudi Arabia
More protests took place in November after Morsi assumed sweeping powers, putting him on a collision course with the judiciary, and raising questions about the country’s democratic future, as well as earing him the moniker of ‘new pharaoh’.

Egypt's central bank has received $2bn in Saudi funds, the latest instalment of a $12bn aid package pledged by Gulf Arab states after the military ousted Islamist President Mohamed Mursi on July 3.

Egypt's finances, in havoc from political strife since Egypt's 2011 popular uprising, worsened in the first five months of 2013, with the budget deficit widening to almost half of all state spending.

Foreign reserves fell to $14.9bn in June, representing less than the three months of imports that the International Monetary Fund considers to be a minimum safe cushion. Only about half of the reserves are in the form of cash or in securities that can be spent easily.

The mounting distress pushed Mursi to approve a 24.2 percent increase in borrowing to finance the budget deficit days before he was deposed, a law published in the official gazette on Sunday showed.

Central bank governor Hisham Ramez told Reuters the Saudi funds arrived in the form of a five-year interest-free deposit at the bank.

The bank had already received $3bn from the UAE on Thursday, $2bn of which was a cash deposit and $1bn an outright grant.

Kuwait has pledged $4bn and Saudi Arabia a further $2bn in energy products and $1bn in cash. Ramez said no date had been set for the Kuwaiti payment and did not indicate when the Saudi $1bn is expected.

The law signed by Mursi increased total government spending on energy subsidies by 20 billion Egyptian pounds ($2.86bn) and boosted interest payments on government debt by 12.65 billion pounds.

Foreign buyers largely fled Egyptian securities after the uprising that toppled Hosni Mubarak in early 2011, forcing the government to rely on local banks for finance. Interest rates were pushed into double digits.

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