Saudi Arabia is set to send Egypt billions of dollars in aid -- $500 million of which has already been disbursed -- to help spur Egypt's economic recovery after last year's revolution.
Egyptian Prime Minister Dr. Kamal al-Ganzouri said Thursday (April 19th) that the Saudi aid package includes $1 billion deposit into the Egyptian central bank; $500 million from the Saudi sovereign wealth fund to finance water, sanitation and grain silo development projects; a $750 million purchase of Egyptian treasury bonds; $250 million in gasoline subsidies; and $200 million to support small- and medium-sized enterprises.
"The Saudi aid package demonstrates good relations between the two countries, especially since this is the first [aid package] of this amount received since the revolution. This [gesture] puts to rest all rumours about differences [between the two countries] that would disrupt or stop any assistance," said Dr. Khalil Hassan, a professor of international economics at Cairo University.
The aid package will ease pressure on Egyptian citizens since it is distributed across several sectors that directly affect their daily lives, he said.
"This aid will also help Egypt's economic situation until after the presidential elections when serious work will commence to attract foreign direct investment. Such investment has been delayed for months awaiting political stability. These grants will also enable the International Monetary Fund to approve a much-discussed loan of $3.2 billion in addition to expected funds from Europe, which are being discussed between Egypt and the European Union," Hassan said.
These developments come days after a report issued by the Egyptian central bank said that the country's foreign currency reserves dropped to around $15.7 billion at the end of February 2012. The reserves lost over $10 billion in a seven-month period.
Dr. Muhyeldin Abu al-Ala, a professor of economics at Zagazig University, linked the Saudi aid package to the movements of Saudi businessmen in Egypt who are returning after obstacles to their investment in the country were lifted.
Abu al-Ala said Saudi Arabia is keen on maintaining good relations with Egypt.
"An example of this is the rise of Saudi tourists in Egypt during the first quarter of this year compared with last year. This is proof that the mood inside the kingdom leans towards supporting Egypt in its current economic and political crisis," he said.
The number of Saudi tourists who visited Egypt increased by 42.8% in the first quarter of 2012, according to a report by the Egyptian General Authority for Tourism Development.
Saudi aid will support the economic plan designed by al-Ganzouri's government, which has primarily relied on the policy of "belt tightening", Abu al-Ala said. The government rationed public and foreign spending by focusing on importing basic commodities that are primarily subsidised by the state, he said.
Abu al-Ala said the Egyptian economy does not suffer from a structural or basic imbalance, just from mishaps that resulted from the country's emergency situation. All it needs are aid injections and the restoration of a safe atmosphere for investors, he said.
He called for focusing on productive sectors for medium and small businesses in the upcoming period, since they have swift and visible results, unlike big businesses. Abu al-Ala also urged support for exports and the food, leather, paper manufacturing, textiles and petrochemicals industries.
Fuel station inspector for the Ministry of Petroleum, Salah Abdul Wahed, thinks the Saudi gasoline aid will help ease the long lines at Egyptian gas stations across the country.
"This will allow Egyptian citizens to sigh in relief since the economic recovery seems within reach, especially since the petrol crisis has been going on for some months no