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Egypt to pay $1.5b arrears to foreign oil firm, says PM

Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement made at an investment conference will revive confidence in an economy battered by nearly three years of political upheaval.

“There is approval to pay $1.5 billion,” Prime Minister Hazem El Beblawi told the gathering primarily designed to lure investment from Gulf Arab states and businessmen.

The oil-producing countries rallied behind Egypt after the army ousted president Mohamed Mursi in July, pledging billions of dollar in financial support.

Finance Minister Ahmed Galal, addressing the same conference, said the Egyptian central bank would supply the dollars needed to pay the firms.

Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.

In the week after the army takeover, Saudi Arabia, Kuwait, and the UAE pledged a combined $12 billion in grants, interest-free loans and oil products. Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country.

Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. “Actually, we’re not only counting on aid. We’re counting on investments to come in.”

Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, Finance Minister Ahmed Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”

Egypt badly needs private capital. Foreign direct investment fell to $3 billion in 2012/13 (July/June), compared with more than $10 billion a few years ago.

Qatar has been reluctant to invest in Egypt since Mursi’s overthrow.

Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.

The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.

The country’s economy grew a meagre 2.2 per cent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 per cent.

Beblawi said the government aimed for economic growth of 3.5 per cent in the fiscal year to end-June.