UAE to loan Egypt US$9 billion for energy purchases
According to reports in local media, the United Arab Emirates has agreed to loan Egypt around US$9 billion to finance the purchase of petroleum products.
State-owned daily Al-Ahram cited a petroleum ministry official who said the loan has been offered at an interest rate of two to three percent, to be paid back over four years, with a one-year grace period.
The government has racked up around $6 billion in arrears to foreign oil companies.
Short on both energy and cash, the government has lagged behind in payments to multinational oil producers. This problem has been exacerbated by the state dipping into the petroleum supplies allocated to foreign companies for export, and failing to reimburse the costs. This caused British gas producer BG to declare force majeure earlier this year, and in 2012 led to UAE-based Dana Gas missing a repayment on a $1 billion loan.
The government’s mounting debt has damaged its reputation and played a role in discouraging foreign investment in the petroleum sector. In response, the government has repeatedly promised to settle its debts, citing bond sales and savings from subsidy cuts as possible sources of financing.
Earlier this year, Saudi Arabia pledged to supply around $3.5 billion worth of petroleum aid this year, in addition to some $4 billion worth of petroleum aid supplied between July and December of 2013. However, those supplies are set to come to an end after this month.
The UAE loan will reportedly come into effect by September.
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