CAIRO (AP) — Qatar announced Tuesday it was doubling its financial aid to the Egyptian government with a new injection of $2.5 billion, underlining its role in propping up Cairo's foreign currency reserves and highlighting its strong ties with the Muslim Brotherhood leadership.
The help from Qatar has been crucial to the government of President Mohammed Morsi, who hails from the Brotherhood. Qatar has assisted Egypt with $2.5 billion in deposits since August, after Morsi won in the country's first free presidential election.
Qatari Prime Minister Sheik Hamad Bin Jassem Al Thani said his nation will loan Cairo an additional $2 billion and transfer another $500 million outright grant, bringing its total assistance to $5 billion.
The aid comes as Egypt faces an economic crisis.
Egypt's economy has been in a slide since the fall of Hosni Mubarak two years ago. The unrest has scared away foreign investors and crippled the vital tourism industry, both key foreign currency earners for Egypt.
Street protests and clashes over a contentious constitution last month further alarmed residents, who hurried to exchange their Egyptian pounds for U.S. dollars.
The rush prompted Egypt's central bank to introduce a new auction system for banks buying and selling U.S. dollars that insiders said is a type of "controlled devaluation" of the Egyptian pound, which has lost around five percent of its value to the dollar in the past two weeks.
Foreign currency reserves long used to prop up the currency have fallen by more than 50 percent since before the uprising and now stand at $15 billion. The central bank warned that is a "critical minimum level" needed to cover debt payments and buy vital imports.
Egypt has renewed talks toward a $4.8 billion loan from the International Monetary Fund. The package, if approved, is not enough to cover Egypt's external financing requirement, but could help cover a widening budget deficit and boost investor confidence in Egypt's ailing economy.
The Brotherhood, while preparing for parliamentary elections in the coming months, is also under pressure to implement painful austerity measures, including tax hikes and subsidies cuts in what appear to be conditions attached to the IMF loan.
Masood Ahmed, who led the IMF delegation to Cairo on Monday, said in a statement after meeting with Morsi that the lender wants to see Egypt move to "a more inclusive model of economic growth through a socially-balanced homegrown program."
An official in Morsi's office says Qatar's total grant of $1 billion will not need to be paid back. The official spoke on condition of anonymity because he was not authorized to speak to media.
Qatar has already agreed to invest $18 billion in Egypt over the next five years and its QInvest company has moved to purchase a majority stake in Egypt's biggest investment bank, EFG Hermes.
Qatari assistance to Morsi's government comes as the oil-rich Gulf state faces scrutiny over its ties with Libya's Brotherhood group, funneling weapons and funds to the anti-Moammar Gadhafi forces during that nation's civil war last year.
Additionally, Qatar has been a key supporter of the Syrian opposition, and particularly its Brotherhood-aligned members.
Answering a question about Qatar's growing influence in the region, Hamad denied his nation seeks to interfere in other nations' internal affairs.
"Talk about Qatari domination has unfortunately been raised by some for internal political reasons in Egypt, but we did not interfere in any country's affairs," he told reporters in Cairo following a meeting with Morsi.
"We want to see Egypt economically strong and politically stable," he said.
He brushed off as rumors in local media that Qatar was considering buying Egypt's Suez Canal, one of the country's main income producers.
"It was not offered to us by the Egyptian government," he said, laughing in response to a reporter's question.