Egypt's central bank
The Egyptian government is working closely with its Saudi counterpart to establish an implementation plan for the $1 billion financial package offers by Riyadh to Cairo. The deposit will be transferred to Egypt's central bank
, taking into account that Saudi Arabia had earlier transferred $500 million to support Egypt's 2012 budget.
The package includes $500 million to finance high-priority development projects, $250 million for buying petroleum products (to the Egyptian General Petroleum organisation) and a non-refundable $200 million grant for small and medium-sized projects and industries.
The Saudi aid may also give a boost to Egypt’s efforts to obtain the $3.2 billion loan it requested from the IMF in January. The fund says Egypt should show how it would meet additional financing needs, as well as providing evidence that the economic program tied to the loan has sufficiently broad political support to ensure it will be implemented.
However economic experts don't have a very optimistic outlook.
"The loan will not relieve financial pressure on Egypt...it was probably offered to Egypt in order to enable it meeting the IMF's requirements for a loan," Arabstoday was informed.
Acclaimed economist Hazem al-Biblawi said the Saudi deposit should improve the financial situation of the state, but it will have nothing to do with either investments or foreign currency reserves which started to rise since last month, when it reached $ 15.2 million.
Egypt’s foreign reserves have plunged about 60 percent since the end of 2010. The decline halted in April when reserves rose for the first time since the uprising that began in January last year and ousted former president Hosni Mubarak. The central bank said a revival in tourism and a slowdown in capital flows out of the country helped stem the drop.
Last month, Egyptian finance minister Momtaz el-Saieed said Egypt’s foreign reserves will show an “improvement” as the government receives aid from Saudi Arabia.
Biblawi added that the most important part of the Saudi support package was the $500 million dedicated to development projects, saying that these types of donations are much better for Egypt's economy as it will not be wasted in reducing the budget deficit.The Egyptian central bank said this week that Egypt will seek to raise $750 million in dollar-denominated treasury bills on May 15.
Egypt’s economic growth slowed to 0.4 percent in the final quarter of 2011, from 5.6 percent a year earlier.