Egypt left vulnerable after Qatari snub

It was bound to happen sooner or later.

Egypt has returned to Qatar the $2 billion the Gulf state deposited in Egypt’s central bank after negotiations to convert the money into three-year bonds failed.

Though this represents only a quarter of the total funds Qatar has lent or given to Egypt, the decision to return the money symbolises the increasingly strained ties between Cairo and Doha following the ouster of Islamist president Mohammed Morsi in July.

Qatar had been a strong supporter of the Muslim Brotherhood’s Morsi and his departure raised questions of whether Egypt would have to repay any of the total $8 billion in Qatar deposits and loans. Official reports suggest Egypt couldn’t reach a deal with Qatar and decided to repay the deposit rather than convert the $2 billion into bonds.

But in reality, perhaps Qatar was asking for a higher interest rate than Egypt was prepared to pay. Or maybe Qatar simply wanted its money back.

Either way, Egypt has been left in a vulnerable position.

Despite the $12 billion in support from Saudi Arabia, Kuwait and the United Arab Emirates that the government keeps boasting about, the breakdown of this bond deal shows that Egypt cannot rely on the Gulf to solve its problems.

The truth is that multi billion dollar support came because the Brotherhood were eradicated from the political scene, not because Gulf states are particularly bothered about seeing an economic recovery. But here’s the dilemma: the international community have openly stated they want an “inclusive political solution” that does not abandon the Islamists.

So how will Egypt reconcile the needs of international donors (such as the International Monetary Fund, African Development Bank and World Bank who can help implement essential reforms but need the Muslim Brotherhood on board), along with requirements of the Gulf states (who have provided a helpful but unsustainable safety net)?

Egypt has so far taken the easy road by refusing to make any real budget cuts and instead announced an unrealistic stimulus package that it can’t afford.

The Qatari deal breaker signals that the government is weak and its backers are dwindling. Now is the time for Egypt to reconsider how to make the most of the Gulf while the support lasts.


  • Rupert Neil Bumfrey (@rupertbu)
    Posted September 20, 2013 at 11:02 am | Permalink

    #SaudiArabia will be happy to plug the gap and restore themselves to the role of leader, leaving the usurper #Qatar on the side-lines.

    I would imagine #UAE will also be smiling at the apparent dismissal of Qatar.

    • Seifeddine Ferjani
      Posted October 7, 2013 at 8:42 am | Permalink

      But how long can Saudi plug the hole? With an unstable internal situation, and everyone waiting for the current king to die its a problem. Then you have the UAE whose support depends on Saudi strength (already negotiating with Iran). Relying on a third party for your financial security is a problem. May be the army will use its reserves to prop up their finances? IMF blinks first? EU blinks first? Because from what I know while the current situation is unstable in Egypt it is difficult to be optimistic. Then you have that all the GCC countries depending on oil price fluctuations another risk… No way to run a policy. But I hope Egypt’s central banker’s attitude is more than just bravado.

  • Tarek Abdallah
    Posted September 20, 2013 at 12:11 pm | Permalink

    Just wanted to say thank you for your informative articles and keep up the good work.

    • Hofo Bofo
      Posted September 20, 2013 at 1:50 pm | Permalink

      Farah, I would love to tell you that you may go to Hell with your sick articles which are full of poison and Hate tward the greatest country on earth since the dawn of civilaizations where there were non but Egypt only.

      • ayci beci
        Posted September 20, 2013 at 2:42 pm | Permalink

        Yay… hofoli bofoli, we will all go to hell very soon, if we continue being disrespectful to others, whose noses are strange, the dialect is awkward and whose opinions we don’t share. The economy of present day Egypt is collapsing… a none-but-Egypt-alone-civilization won’t buy you a piece of bread. Especially now, that the tourists shun away and foreign investors are getting a hiccup when it comes to Egypt.

        Farah, thanks for sharing your thoughts.

  • Nasser
    Posted September 21, 2013 at 9:31 am | Permalink

    Qatar supported egypt before the Muslim Brotherhood were elected to rule. I am glad the money is back to Qatar and I hope we get the rest of the money back unless a just and legitimate government is elected in Egypt again.

  • Gehan D
    Posted September 24, 2013 at 7:02 pm | Permalink

    Farah, you are way off … you may be excused because your profile shows specializing in the financial angle of things, but there is more to Egypt than Qatari money … in fact it may be the best thing that is happening to Egypt right now … since we are in the process of cleaning out thieves and thugs and cults … and getting back in touch with our 7,000 plus years of civilization .. that had been burdened by tyrants and dictators … Egypt is a very wealthy country not only in its resources : human and natural, but in its civility and culture …

  • Waleed Elbadawi
    Posted September 25, 2013 at 8:50 pm | Permalink

    Please do not be discouraged by the vitriol spewed on these comment pages. The fourth estate is essential for expanding the parameters of public discourse.

  • Farah Halime
    Posted September 30, 2013 at 11:38 am | Permalink

    Thanks for your comments. Part of the purpose of this blog is to encourage a debate on a topic that doesn’t get much airtime.
    Unfortunately, it appears the point of this article was missed.

    I’m not against Egypt taking advantage of its connections to the Gulf – whether it be Qatar, KSA or UAE. Indeed, without the Gulf, Egypt would have struggled economically. However it’s high time the Egyptian government firmed up these economic ties into long-lasting, sustainable investment deals rather continue living hand-to-mouth by relying on spontaneous bursts of cash that may have to be repaid at some undetermined time in the future.

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