MENA: Arab Spring redraws banking map
The new democracies of Egypt, Libya and Tunisia are looking for financial support from the old dynasties of the Gulf. Countries such as Saudi Arabia and Qatar see a chance to extend their influence and make returns. But will a resurgence of nationalism halt the investment?
On August 11, Egyptian president Mohamed Mursi hosted an iftar dinner to break the fast of Ramadan in Cairo for the emir of Qatar, Sheikh Hamad bin Khalifa Al-Thani, who was paying a one-day visit to the Egyptian capital. The recently inaugurated Mursi, a former party official from the Muslim Brotherhood’s Justice and Construction Party, had sworn in his new cabinet just over a week before meeting the emir.
Soon after the summit it was announced that Qatar would deposit $2 billion with the Central Bank of Egypt to support the country’s finances. Egypt’s foreign-currency reserves had dropped to $14.4 billion in July from $36 billion on the eve of the Arab Spring, its balance of payments deficit had more than doubled in the first nine months of the latest financial year, and foreign investment inflows stood at $218 million in the first quarter of 2012 compared with $2.1 billion a year earlier.
Qatar’s pledge might prove a vital lifeline for Egyptian state coffers, and such support had long been promised by Doha, but it was also evidence for those who see the energy-rich Gulf, particularly Qatar, leveraging financial resources to acquire political influence or even cheap assets in post-Arab Spring countries.