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The Egyptian pound slipped to a record low, despite news of Qatar offering $2.5 billion in financial assistance.
CIARO, Egypt — The Egyptian pound slipped to a record low despite Qatar extending $2.5 billion to help the country's ailing economy.
Bloomberg reported that Egypt sold $49.6 million in its foreign currency auction, reducing the amount available to banks.
Egypt's central bank offered $50 million at the sale, down from $60 million the previous day, and $75 million in earlier sales. Bloomberg said the auctions were introduced on Dec. 30 as a way to shore up Egypt's falling foreign reserves.
The Egyptian pound has fallen 5 percent since Dec. 30, reaching a record low of 6.5121 to the dollar on Wednesday.
Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani announced the aid to help Egypt with its currency crisis after meeting with Egyptian President Mohamed Morsi in Cairo.
GlobalPost Senior Correspondent in Cairo Erin Cunningham said Qatar’s billions in aid come in the context of the greater role it’s been playing in the region following the Arab Spring — one of benefactor and kingmaker, including in Libya and later Syria.
"Qatar sees Egypt as a strategic asset and ally within this goal of emerging as a key regional powerbroker on a number of fronts," Cunningham said. "Egypt is the Arab world’s most populous country, with longstanding ties with the US and a respected history as area’s cultural and political center. Any influence here undoubtedly means influence across the Middle East."
Qatar is essentially filling in for Saudi Arabia, Cunningham added, which had long backed former dictator, Hosni Mubarak, but is now both uneasy and sometimes hostile towards the ruling Muslim Brotherhood in Egypt.
"Saudi resents that broken bond and has been less willing to support the Islamists. While sometimes you will see Qatar and Saudi Arabia lining up on the same side – like in Syria – there is a historical rivalry there that often motivates both players. Qatar is less queasy when it comes to dealing with the Muslim Brotherhood and can spite Saudi in this regard."
Qatar has similarly been involved in supporting the Hamas Islamist movement in the Gaza Strip, where it sees future political clients. And Egypt is the gateway to Gaza for Arab regimes seeking to visit or bestow aid, funds, or other goods on the territory.
The BBC said Egypt's central reserves have dropped to a critically low level of $15 billion, from $36 billion before the uprising which unseated Mubarak.
The American credit rating agency Standard & Poor's also downgraded Egypt's long-term credit rating to "B-," the same level as Greece.
A team from the International Monetary Fund is expected to visit within weeks for further talks, noted Al Jazeera. The IMF, which has reportedly pledged $4.8 billion in aid, "remained committed to supporting Egypt in confronting its economic challenges," said Prime Minister Hisham Qandil in a statement on Tuesday.
More on GlobalPost: IMF leaves Egypt as pound declines, but vows to return for more talks