Saudi Arabia has pledged US$4 billion dollars in aid to Egypt in the form of long-term loans and grants, Egypt's military chief said on Saturday, triggering concerns of adding further burdens to post-revolution Egypt's already hefty debt.
The aid package will include a $1 billion deposit at the Central Bank of Egypt and $500 million in bond purchases, al-Ahram daily paper quoted a Saudi official on Sunday as saying.
The news came a few weeks after a promotional tour of the Gulf by Egypt's prime minister Essam Sharaf, and finance minister Samir Radwan, who visited Saudi Arabia, Qatar, the United Arab Emirates and Kuwait, looking to raise both private investment and loans.
Following the announcement, Hussein Tantawi, the country's de facto ruler, thanked Saudi Arabia for "supporting Egypt's economy with approximately four billion dollars".
The statement did not, however, spell out what the preferential terms of the soft loans would be.
"The statement issued by the SCAF, as well as the media reports, don’t give any details of the sort of conditions placed on Egypt," says Magda Qandil, executive director of the Egyptian Centre for Economic Studies (ECES). "Yet any kind of financial aid is conditioned."
Saudi Arabia's offer came just two days after the United States president Barack Obama's announcement that the US will relieve up to $1 billion of Egypt's debt, prompting similarly mixed reactions from economic commentators and analysts.
Qandil doesn’t think the timing is a coincidence.
"Regardless of what purposes the Kingdom might have," Qandil says, "what's really interesting for me is the fact that the aid announcement followed the US debt swap announcement."
"Despite omitting Saudi Arabia from his speech, Obama asked for some economic powers to support the Egyptian and Tunisian economies in the post-revolution era -- I think the Kingdom was what he meant by that."
In Obama's Thursday speech on Middle East and North Africa there was a buried reference to a collective aid policy towards Egypt.
"Together," he said, "we must help them recover from the disruption of their democratic upheaval, and support the governments that will be elected later this year."
"And we are urging other countries to help Egypt and Tunisia meet their near-term financial needs."
According to Egypt's state information agency, the total sum of Saudi investments in Egypt exceeds LE71 billion and Saudi Arabia occupies first place on the list of Arab countries investing in Egypt and second on the list of non-Arab countries.
Trade exchange between the two countries reached $4.4 billion in 2008.
Egyptian exports to Saudi Arabia, put at $3.1 billion, include iron and steel products, furniture, foodstuffs, raw materials, cereals, vegetables and fruits and electric and medical equipment.
Egyptian imports, put at $1.3 billion, include gasoline, butane, oil products, mineral oils and fuel, plastic and rubber products, and machines and equipment.
Egypt is already in talks with the International Monetary Fund over a $4bn loan, with Radwan saying that Egypt needs $10-12bn in external funding until the end of June 2012.
But getting more loans has spurred concerns among analysts.
"Even with the soft loans offered by the donors, this leaves a burden on the economy and thus the solution is not by borrowing, it's by restructuring the economy," Qandil adds.