Aid from Gulf states 'is crucial for Egypt'

As loan talks with IMF are put on hold, senior US diplomat arrives in Cairo to snubs from Tamarod rebel leader and Al Nour Islamists. Alice Fordham reports

A supporter of Mohammed Morsi attaches a poster to barbed wire as soldiers stand guard at a road linked to the Republican Guard building in Cairo.

CAIRO // Crucial financial aid from the UAE and other Gulf states will keep Egypt afloat during its political transition, a leading minister in the new government said yesterday.

Ashraf Al Araby, planning minister in the cabinet being formed after Mohammed Morsi was removed on July 3, said Egypt would not need to apply immediately for an International Monetary Fund loan, which would entail painful economic reforms.

It would not be appropriate to resume negotiations with the IMF until the end of the year, he said.

The UAE, Saudi Arabia and Kuwait have offered Egypt US$12 billion (Dh44bn) in financial aid and fuel supplies, and congratulated the new leadership on taking over from Mr Morsi's unpopular government.

The minister's upbeat economic assessment came as the first senior United States official to visit Egypt since Mr Morsi's presidency ended was snubbed, both by Islamists and their opponents.

The deputy secretary of state William Burns spoke to the interim president Adly Mansour and prime minister Hazem El Beblawi, but the Islamist Al Nour party and the Tamarod rebel protest movement both turned down invitations to meet him.

"First, they [the US] need to acknowledge the new system," Tamarod founder Mahmoud Badr said. "Secondly, they must apologise for their support for the Muslim Brotherhood's party and terrorism. Then we can think about it." In a further slight, Mr Badr posted a copy of his invitation, including the US embassy's telephone number, on the internet.

Al Nour said they had rejected a meeting because of "unjustified" US meddling in Egypt's affairs.

Mr Burns called on Egypt's interim leaders to ensure an "nclusive transition to democracy. "We hope it will be a chance to learn some of the lessons and correct some of the mistakes of the last two years," he said.

He said the political process, particularly constitutional changes, should be "transparent and inclusive" and that no party should be excluded - a clear call for the Muslim Brotherhood to be involved.

The protests that led to Mr Morsi's removal were triggered in part by his failure to tackle economic issues, particularly rising prices and unemployment

Winning approval for an IMF loan had been seen as a trigger for much-needed foreign investment, but discussions stalled last December as the government wobbled and many observers criticised the IMF's conditions, which would entail gradual reform of subsidies.

Removing subsidies on food and fuel would have been politically difficult, particularly at that time as the government's legitimacy was eroded by popular criticism and the economy sank, hit hard by two years of turmoil after the fall of Hosni Mubarak.

Mr Al Araby, a US-educated economist who was also planning minister under Mr Morsi until he was dismissed in May, handled the unsuccessful negotiations on a US$4.8bn IMF loan.

Because of political deadlock, unrest and the lack of consensus between political factions, it was "not appropriate to have a new round of negotiations … until Egypt regains political stability", he told Al Ahram newspaper yesterday, emphasising that it was his personal view.

Since the fall of Mr Morsi's government, his supporters have taken to the streets, sometimes clashing with the cross-section of society who supported his removal. Leaders of the Muslim Brotherhood, from which Mr Morsi draws most of his support, had called once again for a "million-man" march in Cairo last night.

However, although the Gulf states' funds will provide a much-needed respite from hardship - reports this month suggested that wheat supplies were dwindling - analysts said that given the liberal economic stance of several new interim government members, measures such as subsidy reform could still be introduced.

The prime minister, Mr El Beblawi, who was finance minister in 2011, has defended the need for loans in the past, and attacked unsustainable practices such as importing more goods than the country could afford. Ahmed Galal, the new finance minister, is considered a liberal, even left-leaning economist, who used to work for the World Bank.

"The cash was badly needed," said David Butter, an associate fellow with the Chatham House think tank in London who follows Arab economies. "The Saudi, Kuwaiti and Emirati money is doing the … job of keeping the country away from bankruptcy." But in itself, he said, the aid would not stimulate the investment Egypt badly needs.

Despite publicly backing away from the idea of an IMF loan, Mr Butter said he expected the new cabinet to "move as soon as they can to have some serious discussions with the IMF to talk about the problems of sorting out the Egyptian economy".

With the streets of Cairo draped with posters furiously decrying US policy - especially the description by some American news outlets of Mr Morsi's removal from the presidency as a coup - the US faces hostility from many Egyptian groups.

The liberals who campaigned against the Muslim Brotherhood resent perceived American support for Mr Morsi's government. They accuse the US ambassador Anne Patterson of failing to criticise the failings of his government.

At the same time, many supporters of Mr Morsi also blame America for engineering his downfall.

"On all sides, I think there is resentment and suspicion of the US and the role we played," said David Schenker of the Washington Institute for Near East Policy.

For decades, he said, US interests in Egypt focused on national security: counter-terrorism, the Suez Canal, the peace treaty with Israel.

"But I think there's been in recent weeks a greater appreciation that our priorities have to include governance issues and things like that," he said.

"This is not something that the US has spoken about very much since 2011. It was not very critical of the Morsi regime and how it handled the domestic opposition, and it's contributed to the prevalent public sentiment that the US backed the Morsi regime, which is not really helpful from the US point of view."

* Additional reporting by the Associated Press and Reuters

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