15 Nov 2012

Financial assistance for Egypt

11:11 am on 15 November 2012

The European Union has approved a financial support package worth 5 billion euro ($6.4 billion) for Egypt.

A statement by President Mohammed Mursi's office said the European Investment Bank and the European Bank for Reconstruction and Development would each provide 2 billion euros.

The remaining 1 billionn euros will come from EU members.

The announcement came after Mr Mursi held talks with EU foreign policy chief Catherine Ashton in Cairo.

In September, European Commission President Jose Manuel Barroso offered Egypt 700 million euros in financial aid, which he said was conditional on it reaching an agreement with the International Monetary Fund.

The BBC reports Egypt is expected to sign a memorandum of understanding with IMF representatives for a loan of $US4.8 billion this week to help it deal with a budget deficit of $US28 billion and a balance of payments crisis.

Egypt's foreign reserves have almost halved since the overthrow of former President Hosni Mubarak in February 2011.

Domestic moves

On Tuesday, Prime Minister Hisham Qandil said he would a government subsidy programme would be restructured. About 40% of Egypt's 83 million people live on less than $US2 per day.

He also said natural gas prices for industry would be increased and that there would be unspecified fiscal and tax reforms.

Mr Qandil said the government aimed to increase Egypt's GDP growth rate to 3.5% this fiscal year, up from 2.2%, and create 700,000 new jobs.