Egypt agrees to pay $1.5bn arrears to foreign oil firms

December 04, 2013 - 11:39:42 am

CAIRO: The Egyptian government has approved payment of $1.5 billion of arrears owed to foreign oil firms, the prime minister said on Wednesday.

"There is approval to pay $1.5 billion," Prime Minister Hazem el-Beblawi told an economic conference designed to lure investment from Gulf states.

The government has said it owes around $6 billion to foreign firms working in its oil and gas sector. 

Beblawi said the finance minister had just informed him of the final approval. 

He also said the government was targeting economic growth of 3.5 percent in the fiscal year to end-June.

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.

Authorities have repeatedly promised to repay arrears since the army toppled Islamist President Mohamed Mursi on July 3 and after oil-producing Gulf Arab states, which fiercely opposed to his Muslim Brotherhood, promised financial support to Egypt.

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.



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 or $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)   


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