From left: Mostafa Higazi, the Presidential Adviser for Political Affairs, Egypt’s Finance Minister Ahmed Galal, Egypt’s Central Bank Governor Hisham Ramez and Egypt’s Deputy Prime Minister Ziad Bahaa El Din at the opening session of the “Egypt/GCC Investment Forum — Strategic Partnerships, Economic Synergies” in Cairo yesterday.
CAIRO: Egypt promised yesterday to pay $1.5bn of the $6bn it says it owes foreign oil companies, aiming to restore investor confidence in an economy damaged by nearly three years of political turmoil.
Officials speaking at an investment conference pitched at Gulf Arab states and businessmen tried to allay concerns ranging from legal uncertainty to the foreign currency black market. “There is approval to pay $1.5bn,” Prime Minister Hazem El Beblawi told the gathering. He said the arrears had discouraged investment in the critical energy sector.
Finance Minister Ahmed Galal told the conference the central bank would supply the dollars to reimburse the oil companies and Oil Minister Sherif Ismail said this would happen within days. Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2bn at the end of 2012.
In the week after the army removed president Mohammed Mursi, Saudi Arabia, Kuwait and the UAE promised Egypt a total of $12bn in grants, interest-free loans and oil products.
Egypt hopes Gulf investors will also inject cash. Investment Minister Osama Saleh told Reuters he hoped for $4bn-$5bn in direct foreign investment in the year to end-June 2014.
Government officials told the conference that Egypt’s political roadmap to elections and restored stability was on track. But there is no calm on the streets, where Mursi supporters are still protesting against what they call a military coup accompanied by human rights abuses.
Asked if he anticipated more aid from Saudi Arabia, Finance Minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
The UAE seems keen for its companies to launch or resume projects there. A source close to big Abu Dhabi investment companies said nearly $5bn had been committed in loans and investments in Egypt in the last four months and there was scope for more.
UAE Minister of State Sultan Al Jaber said sectors under discussion included agriculture, oil, gas and renewable energy, but called for the right legal framework to reassure investors.
Egypt badly needs private capital. Foreign direct investment fell to $3bn in the 2012/13 financial year, which ended in June, compared with more than $10bn a few years ago. The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt’s investment minister, told the conference.
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 current fiscal year.
Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, said he would invest $1bn in Egypt in the first quarter of 2014, mostly in construction, real estate, agriculture and microfinance. But it will take more than one heavy hitter to fix Egypt’s finances. 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. Reuters