Deficit and development projects target of Egypt's second stimulus disbursed this week
Egypt's interim government unveiled its second stimulus package on Monday, which will inject LE33.9 billion ($4.87 billion) into the economy, with most of that money coming from aid pledged by the United Arab Emirates. Previously the finance ministry said Egypt planned to spend around LE30 billion. The first stimulus package, amounting to LE30 billion, was launched in August.
Ahmed Galal, the finance minister, said in a statement on Monday that the new spending would be financed mostly by the United Arab Emirates, one of the Gulf Arab countries that has pledged billions of dollars in support for Egypt.
Egypt has already received $3 billion in aid from the United Arab Emirates: a $1 billion grant and $2 billion loan in the form of an interest-free central bank deposit.
At the end of January, official sources announced the UAE would contribute a further $1.8 billion in the form of fuel shipments.
The minister said that any additional expenditure would be covered by additional revenues in order to control the budget deficit.
However, economists believe the deficit target of 10 percent of GDP is unrealistic.
The Emirati aid forms part of a bigger aid package that Gulf Arab states pledged after the military ousted Islamist president Mohamed Morsi in July 2013.
Three years of political unrest since a popular uprising ousted Egyptian president Hosni Mubarak have scared away investors and tourists, weighing on economic growth.
The army toppled Islamist president Mohamed Morsi in July, triggering unrest. Security forces have killed about 1,000 Morsi supporters and arrested many more in a tough crackdown.
Analysts say the interim authorities are anxious to get the economy moving to shore up public support and curb the scope for more unrest as the government moves along a political transition plan leading to elections this year.
Nearly LE20 billion will be spent on development projects and LE2 billion will be directed towards developing a corridor around the Suez Canal under the second stimulus package, according to the statement.
LE12 billion will go towards financing social programmes, including a rise in the minimum wage.
- Need some space? UAE's banking sector is getting too crowded
- Bank funding in the Middle East doesn't boil down to liquidity alone
- Why is the Israeli shekel so weak?
- What doesn't kill you, makes your stronger: why the Arab Bank is likely to emerge from the Israeli lawsuit 'unscathed with flying colors'
- Too foreign? An inside look into the struggles of foreign banks in Saudi Arabia