Saudi Arabia has deposited $3 billion each in the Central Bank of Egypt, according to the Saudi Press Agency (SPA).
The SPA Monday report cited a statement by the Saudi Finance Ministry, saying that Riyadh is considered one of the leading countries supporting the foreign exchange reserves of nations in need during the pandemic.
The Saudi finance ministry statement stated that Saudi Arabia has made a $3bn deposit into Egypt’s central bank and extended the term for existing deposit of $2.3bn
According to data from the Central Bank of Egypt, Saudi Arabia holds long-term deposits in the lender, totaling $5.5 billion as of the end of March.
Saudi Finance Minister Mohammed al-Jadaan told Al Arabiya TV the kingdom’s latest deposit in the CBE was intended to be long-term.
A statement by the Saudi ministry suggested that the total size of its Egypt deposits had changed little since then.
The two countries have had close relations since 2013, when then Egyptian president Mohamed Morsi was removed from power by his then-defence minister Abdel Fattah al-Sisi, who is now leading the country.
Ever since, Saudi-Egyptian relations have developed greatly, resulting in major economic agreements. In 2016, King Salman signed a $25bn economic agreement and in 2019 it pledged $7 million in development projects in Egypt.
Saudi Arabia is the second-biggest investor in Egypt, according to a statement by the Egyptian Trade and Industry Minister Nevine Gamea during the inauguration of a Saudi-Egyptian Joint Business Council.
Egypt has also backed Saudi Arabia during its diplomatic crisis with Qatar.
Saudi Arabia also deposited $3bn with Pakistan’s central bank, according to Sunday’s statement, and it extended $1.2bn of trade finance to support Pakistan’s balance of payments.
“The kingdom is one of the main countries that supported the foreign reserves of needy countries during the pandemic,” the statement said.
Financial support can easily become a double-edged sword, for states desperate for help.
Egypt has been living this experiences since Sisi’s coup against late president Morsi.
Cash inflow from the Gulf countries may have made the Egyptian regime feel victorious, but the reality is completely different.
In 2015, the Gulf states such as the UAE, Kuwait, Oman and Saudi Arabia pledged $12.5b in financial package to Egypt at a grand investment conference.
However, half of the amount was deposited in the Egypt’s Central Bank (CBE) to balance out country’s replenished foreign currency reserves.
The rest of the Gulf’s financial stimulus was agreed to come into the country as investments.
However, analysts at Capital Economics believe that Gulf cash may help keep Egypt’s economy afloat, yet the challenge is how to face the decline in the Egyptian economic situation.
Saudi deposits, loans, and even investments may help Egypt overcome pressing financial difficulties, but a lack of transparency regarding the terms of repayment and other hidden information raises concerns about the country’s economic sustainability.