Egypt to pay $1.5 bln arrears to foreign oil firms

CAIRO – Reuters

Egypt's Prime Minister Hazem el-Beblawi. REUTERS Photo

The Egyptian government has approved payment of $1.5 billion of the $6 billion it says it owes foreign oil firms, the prime minister said on Dec. 4, saying the failure to pay off the debt was holding the economy back.

Egypt’s economy has been battered by two years of political upheaval that have frightened away tourists and investors, cutting tax revenues and inflows of foreign currency. That has increased pressure on the government to get oil companies investing again in extraction and exploration.

“There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told an economic conference designed to lure investment from Gulf states, adding the arrears had prevented companies from investing.
He also said the government was targeting economic growth of 3.5 percent in the fiscal year to end-June.

Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.

Financial disclosures by firms including BP PLC, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.

Authorities have repeatedly promised to repay arrears since the army toppled Islamist President Mohamed Morsi on July 3 and after oil-producing Gulf Arab states, which fiercely opposed to his Muslim Brotherhood, promised financial support to Egypt.

In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans, and oil products.