Egypt to settle $1.5 billion owed to foreign oil firms in a bid to restore investor confidence

CAIRO – Egypt is committed to pay nearly a quarter of the total arrears it owes foreign oil companies and increase economic growth to 3.5 per cent by the end of the fiscal year, in a bid to restore investor confidence in an economy damaged by nearly three years of unrest, the country’s interim prime minister said Wednesday.

Hazem el-Beblawi was speaking at an investors’ forum that brought to Cairo businessmen and officials from the Gulf countries. He said the outstanding arrears have weakened exploration and investment in the vital oil sector.

Egypt is seeking to attract Gulf investment into the economy that has been battered by nearly three years of unrest since the 2011 ouster of longtime autocrat Hosni Mubarak.

Saudi Arabia, the United Arab Emirates and Kuwait pledged more than $12 billion dollars in aid to Egypt following the July 3 coup that ousted President Mohammed Morsi, the Islamist who succeeded Mubarak after winning the first free presidential elections in the country’s history. The coup followed demonstrations by millions calling for Morsi to leave.

The Gulf aid, a mix of grants, cash deposits and oil and gas products, has propped Egypt’s ailing economy and improved its dwindling foreign reserves.

El-Beblawi told the conference his government approved settling $1.5 billion it owed to foreign oil firms.

Petroleum Ministry spokesman Hamdy Abdel-Aziz said the latest figure for money owed to oil companies stood at $6.2 billion in November.

“I hope this is the beginning of restoring confidence that Egypt is serious in protecting investors and settling” its dues, el-Beblawi said.

He also said the government is working hard to restore security, which is a cornerstone for a strong economy.

El-Beblawi also urged investors to show patience with unrest-hit Egypt. He added that the government is on track to restore political and economic stability, and has realized a “milestone” by completing amendments to the country’s constitution.

“The government is working hard to improve the economy and increase growth rate,” he said. He said the government aims to increase growth rate to 3.5 per cent by the end of the current fiscal year. The growth rate was estimated at 2.2 per cent last year.

Finance Minister Ahmed Galal told the conference that his government also aims to reduce the current budget deficit to 10 per cent of the national income. The government had said the deficit had soared to 14 per cent by the time Morsi was ousted.

The government has been hit by a relentless wave of protests by Morsi supporters, who still resist his removal from office. Other youth protest movements have recently also taken to the streets demonstrating against the newly drafted constitution amendments and a protest law they say stifles any opposition to the government.

El-Beblawi said his government is determined to implement the new protest law to prevent “chaos” from unsettling recent achievements.