Cash-strapped Morsi shifts Arab allies in search of funds

Dina Ezzat, Thursday 28 Mar 2013

Following comments at Arab Summit in Doha, President Morsi is reportedly shifting focus away from Saudi Arabia and the Gulf States to Iraq and Libya in attempt to underwrite Egypt's financial obligations

Egypt's President Mohamed Mursi attends the Arab League summit in Doha March 26, 2013 (Photo: Reuters)

President Mohamed Morsi has assured Prime Minister Hisham Qandil that "some funds" would be available in the state coffers before the end of the month to cover at least some of the government’s basic financial obligations, said sources close to Egypt’s premier.

“We will not be unable to buy the basic needs – [to say so] is untrue. We are not sitting here with our arms crossed. We are working to make sure that everything is covered,” a government source told Ahram Online.

Ahram Online had learned that President Morsi is facing difficulties in providing essential cash to cover the purchase of essential commodities, including food and energy.

The country's strategic stocks of imported and local wheat fell to just 2.207 million tonnes by 13 March, enough to last for less than three months.

"Traditional suppliers consider that Egypt is around one million tonnes behind in imports," Fehmi Hannachi, head of commodity finance for Middle East and North Africa at ABC International Bank Plc and a board member of ABC Egypt, told Reuters on 25 March.

Each for its own reasons, the Central Bank of Egypt and the armed forces said they have no immediate cash to provide for the upcoming purchase of food and energy requirements, according to government leaks.

Technically speaking, this could mean a serious drop in commodities available – price rises aside.

Turning to Baghdad, Tripoli

A total of around $8 billion, according to the same government source, should be coming to state coffers starting in the coming week. A part of this amount is coming from Iraq, upon Iranian recommendation, according to a Cairo-based European source.

Other funds were said to be coming from Libya in the wake of the handover of two Libyan officials of the ousted regime of Muammar Gaddafi who were all but accorded verbal asylum in Egypt.

Even though Libya’s General National Congress (GNC) denied reports that Egypt’s Central Bank would receive a deposit of $2 billion from the Libyan government soon, official financial sources still hope that Egypt’s administration will be able to get help from the neighbouring country as political tensions appear to subside after Cairo’s arrest of three Gaddafi aides who for months Tripoli had been requesting be extradited.

The new channels between Cairo and both Baghdad and Tripoli are thought by the Egyptian regime to be a provisional replacement for hesitant funds that Egypt was hoping to get from Saudi Arabia, which has been promising to deposit around $4 billion in the Central Bank of Egypt since mid-2012. The Saudi aid seems more distant now, especially after the 24-hour freeze of the funds of key Saudi investors in Egypt upon order of the prosecutor-general for alleged illicit involvement in the selling of an Egyptian bank in cooperation with the sons of ousted president Hosni Mubarak.

“Let’s face it, apart from Qatar, none of the Arab Gulf States is willing to generate funds for this regime. I am telling you, they are actually cutting down on their existing investments in Egypt,” said a leading businessman who is in partnership with top Arab Gulf entrepreneurs.

Meanwhile, Qatar, according to a well-informed Doha-based source, is not coming forward with much more. “The Qataris are not amused by the negative public and media perception of their assistance to Egypt,” he said.

In March, Qatari Finance Minister Youssef Kamal said his country did not expect to give further financial aid to Egypt “in the immediate term.” According to the Doha-based source, this is not expected to change anytime soon.

Shifting alliances

During his participation in the abruptly concluded Arab Summit in Doha this week, Morsi’s statements and words revealed the new mood of Egyptian perceptions of old and new Arab allies.

The presidential statement before the Arab Summit that "nobody is allowed to put his finger in Egypt" was read by Arab delegations as a direct message to two leading Arab countries that used to be almost unconditionally generous with their aid to Egypt: the United Arab Emirates, which is making no secret of its anxiety towards the intention of the new Muslim Brotherhood leadership in Egypt and that is offering safe haven to Mubarak regime figures who fear or face legal prosecution after the January 25 Revolution, and Saudi Arabia, which had made repeated offers to host the jailed Mubarak and his family in return for a handsome financial assistance package.

Arab – including Egyptian – diplomats say that tension is higher between Egypt and the UAE than between Egypt and Saudi Arabia.

“Ultimately, we are working with Saudi Arabia on Syria and we will be working with them on Palestinian matters,” said an Egyptian diplomat.

Both Cairo and Riyadh consult regularly through traditional diplomatic channels, rather than at the top levels as during the years of Mubarak, on options to end the crisis in Syria. Egypt and Saudi Arabia are also working with the Palestinians – Egypt more with Hamas and Saudi Arabia more with the Palestinian Authority, which is now given a cold shoulder from Cairo – to respond positively to a new US diplomatic attempt to resume what Washington portrays as constructive and conclusive peace talks with Israel.

From the Egyptian perspective, the UAE is an almost self-announced enemy of the Morsi government. Egyptian officials speak of “funds” channelled by Abu Dhabi to the anti-Morsi camp, and of “hidden and conspicuous contacts” between UAE intelligence and some quarters within Egyptian intelligence to “topple the Morsi regime.”

Prior to his trip to Doha, according to one source, Morsi received fresh information about Abu Dhabi contacts with some Egyptian intelligence generals, which was reportedly behind his finger-pointing at the Arab Summit.

Short link: