By Patrick Werr
CAIRO, April 29 Qatar wants 5 percent interest
on $3 billion in bonds it has offered to buy from Egypt, an
Egyptian official involved in the talks said on Monday, a price
higher than expected yet one that Cairo may have to accept.
Egypt has been asking Arab and Muslim friends for cheap
funds to help it stave off financial collapse following the
popular uprising that ousted Hosni Mubarak in early 2011.
It is negotiating a $4.8 billion dollar loan from the
International Monetary Fund that would carry an interest rate of
just 1.1 percent but has balked at the economic policy terms.
Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani
promised the money when Egyptian Prime Minister Hisham Kandil
visited Qatar on April 10. The Gulf state has already lent Egypt
$5 billion since President Mohamed Mursi took office last July.
The Egyptian official, who asked not to be named, said Qatar
had asked for an annual 5 percent interest on the bonds and a
maturity of no more than 18 months. No agreement had yet been
"We are still discussing the terms, pricing and duration,"
he told Reuters.
The Finance Ministry later issued a statement denying that
Egypt had reached any deal at that interest rate. The Reuters
report to which it referred did not say there was any agreement.
Analysts said say the interest rate puts the bonds close to
international levels but that the parlous state of Egypt's
finances may nonetheless force it to accept the Qatari terms.
Since the uprising, Egypt has been drawing down its foreign
reserves, borrowing from friends and delaying payments to oil
companies to support the price of its currency and to plug a
Reserves have tumbled to $13.4 billion in March from $36
billion just before the uprising.
"I still expect a deal to be done and the funds to flow,"
said Simon Williams, an economist with HSBC. "The market has
already priced the funds in ... if it were to fail, sentiment
would turn bearish once again."
Earlier this month, Libya deposited $2 billion at the
Egyptian central bank and said it would supply Egypt with $1.2
billion worth of crude on interest free credit for a year.
Cairo has been counting on soft loans and easy credit terms
on fuel and food purchases to help get through what threatens to
be a tough summer of power outages, fuel shortages and possible
unrest before parliamentary elections expected later this year.
If Egypt cannot accept the Qatari terms, it may face added
heat to take an IMF loan and apply tax rises and subsidy cuts.