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Saudi Arabia to sign $20bn energy deal with Egypt this week: Reports

The $20bn would be issued as a soft loan with the interest rate set at 2 percent and a grace period of at least three years, sources said
Saudi Arabia has pumped billions into Egypt since the military helped remove Mohamed Morsi in 2013 (AFP)

Saudi Arabia is planning to sign energy and development deals worth $22bn, Egyptian sources said on Tuesday.

Government sources told al-Ahram that Egypt expected the accords to be signed on Friday by Saudi Arabia’s King Salman.

Two separate government sources also told Reuters that the deal would be finalised this week and would consist of a $20bn energy deal that would subsidise Egypt’s petroleum needs for five years and a separate $1.5bn development deal for the restive Sinai Peninsula.

The $20bn would be issued as a soft loan with the interest rate set at 2 percent and a grace period of at least three years, sources told Reuters.

Saudi businessmen could also invest a further $4bn in key projects including the Suez Canal, the Saudi-Egyptian Business Council said.

Reports about the Sinai funding first emerged on Sunday, when Egypt's International co-operation Minister Sahar Nasr said Riyadh would provide funds for agriculture projects and to build residential complexes that would also house hospitals and schools.

Since the Egyptian military in 2013 toppled former President Mohammed Morsi, who hailed from the Muslim Brotherhood, Riyadh and other rich Gulf monarchies have sunk billions into Egypt in a bid to boost the new authorities.

However, falling oil prices have hit the rich oil-producing Gulf States hard, with many analysts speculating that Riyadh may lose interest in bolstering Egypt’s economy.

Cairo has also continued to struggle to revive its economy despite the handouts, with ongoing unrest and militant activity hitting key sectors like tourism hard.