Egypt's finance minister, who has been negotiating with Gulf Arab states for financial assistance, said Sunday that Qatar had given in October a grant of $500 million to support the budget which has ballooned as a result of political turmoil.
Last week, Hazem El-Beblawi announced that Egypt had concluded a deal for $500 million of lending with Saudi Arabia and the same amount from Qatar. He did not, however, give details on the terms of borrowing.
Egypt's economy, which had been growing robustly before the popular uprising earlier this year, was hit hard by the protests, which prompted foreign investors to withdraw funds and saw major revenue sources like tourism suffer.
"They transferred $500 million as a grant to Egypt," Hazem El-Beblawi told Reuters, adding that the Qatari funds had been transferred in the past week or so. "It is a grant for budgetary support," he added.
Egypt forecasts a budget deficit of 8.6 per cent of GDP in the financial year to June 2012. Economists say the estimate may prove optimistic.
Khaled Al-Attiyah, Qatari minister of state for international cooperation, told Al-Jazeera satellite channel late Saturday that Qatar's aim was to offer direct support for the budget and loans at very low rates to deal with immediate economic issues, as well as to offer investment.
He mentioned two projects in port cities, one in Port Said and the other in Alexandria. "These two projects will provide hundreds of thousands of job opportunities," he said.
Egypt reached a $3.2 billion deal with the IMF earlier this year, but the previous finance minister opted in June not to move on with it, partly because the ruling military council did not want to build up foreign debts.
Yields on Egyptian treasury bills rose last month to levels last seen during the global financial crisis in 2008. They have since eased but traders have said Egypt needs external funding to prevent yields surging further.
Beblawi, who was appointed mid-July, accused local banks of asking for high interest rates in their bids for treasury bills, raising local borrowing costs. Beblawi said the government would look for other resources to lower its dependence on local banks.
Saudi Arabia said late September it was ready to invest in Egyptian treasury bills. The promise drove yields to below 13 per cent in an auction of LE6.5 billion of T-bills on 2 October.