The European Union intends to support Egypt’s economy with US$500 million in response to a request by the Egyptian government, a senior EU official said Tuesday.
The money is part of the International Monetary Fund’s economic reform program and will be disbursed within 18 months, said Heliodoro Temprano Arroyo, the European Commission’s director general for economic and financial affairs.
Arroyo’s declaration came during a roundtable discussion organized by the Egyptian Center for Economic Studies under the title, “The Repercussions of the Euro Area Debt Crisis on Neighboring Countries, Including Egypt.”
Arroyo said terms of the Deauville Partnership, signed by G8 major economies in May 2011, will be applied. The agreement involves providing Egypt, Jordan, Morocco and Tunisia with a total of $38 billion during the 2011–2013 period.
He stressed that the effect of the eurozone economic crisis on Egypt will be limited to reducing European tourism by 30 percent.
Arroyo also expressed his concern that Egypt could run out of foreign reserves in six months, especially because the country has already lost about $20 billion of its reserves, or a monthly average of $2.3 billion.
He predicted Egypt’s budget deficit would reach 10 percent this year, but said it could mount to 100 percent within a few years if instability persists.
The EU official attributed the drop in foreign investments in Egypt to uncertainty over the country’s present political and economic situation. He urged Egypt to continue progressing toward democracy and a complete political transition. He also criticized Egypt’s strategy for subsidizing petroleum products, saying it fails to benefit the poor.
