G8 agrees on a US$20 billion aid package for Egypt and Tunisia

The G8 summit in Deauville on 27th May agreed on a US$20 billion aid package from multilateral lending institutions for Egypt and Tunisia. The aim is to give their interim governments breathing space after they have rid themselves of their presidents as they cope with worsening economic performance yet rising expectations of a quick fix.

The Financial Times quoted a number of economic experts broadly welcoming the aid. Alia Moubayed, an economist at Barclays Capital, said, “The international show of support is expected to attend to a large part of Egypt's immediate financing needs, though it will not solve the long-term structural problem of unemployment and job creation…It is, however, extremely important for giving a positive signal to markets and keeping the government focused in its reform agenda for inclusive growth.”

Osama Bishai, chief operating officer of Orascom Construction Industries, the country's biggest building company told the paper, “I hope the Egyptian government will use some of this aid to accelerate its PPP programme to build infrastructure, which we see as one of the tools still left to create jobs. That some of the aid is in the form of loan guarantees will help both Egyptian companies and foreign investors.”

It also quoted Simon Kitchen, strategist at EFG-Hermes, the regional investment bank, as saying, “The return of bigger foreign direct investment figures will need greater clarity on the politics…Maybe this will have to wait until after elections [and the end of the transition by the end of the year.]”

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