As Egypt struggles with dollar shortage, US$900M loan arrives from China

The fate of the US$1 billion loan from the World Bank is still uncertain, but a $900 million loan from China has arrived at the Central Bank of Egypt (CBE).

CBE governor Tarek Amer said the bank received the funds on Sunday, the privately owned finance newspaper Al-Mal reported.

The loan is part of a $1 billion financing deal signed during Chinese President Xi Jinping’s visit to Egypt last month. At the time, Amer said the loan would have to be paid back in eight years, with payments to begin in the third year, and would be available to support Egypt’s general budget.

Amer did not specify the status of the remaining $100 million of the financing package.

The transfer is a much-needed cash infusion at a time when a shortage of dollars is placing increasing strain on Egypt’s economy.

Last week, the CBE reported that foreign reserves were $16.478 billion at the end of January, a marginal rise from the $16.445 billion reported the previous month and about half of the level Egypt maintained prior to the January 25, 2011 revolution.

Egypt has managed to hold reserves steady since September, but has done so at a cost. Both manufacturers and importers claim that persistent dollar shortages are severely impacting their businesses, while the government is facing a growing number of reports that it is having trouble paying its bills for vital commodity imports. Egypt has denied that payment delays are due to liquidity problems, but has faced complaints from both oil and wheat traders.

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