Libya Putting $2 Billion Into Egypt’s Central Bank

Via NY Times

CAIRO — Libya’s transitional government is completing an agreement with Egypt to deposit $2 billion in the Egyptian central bank, an official briefed on the talks said Sunday.

The timing suggested a possible quid pro quo, coming five days after Egypt complied with a months-old Libyan request to round up for possible extradition at least three prominent loyalists of Col. Muammar el-Qaddafi’s who had been living openly in Cairo.

The $2 billion deposit was first reported by the Anatolia news agency of Turkey on Sunday, citing information from the Libyan ambassador to Cairo, Mohamed Fayez Jibril.

The Libyan government had pleaded for months for the extradition of dozens of former allies of Colonel Qaddafi’s who are wanted for trial in Tripoli. But Egypt appeared willing to allow them to remain at liberty in Cairo. It has become a gathering point for Qaddafi loyalists who fled the revolution in Libya.

Egypt, however, is now acutely short of hard currency. Tourism revenue and new foreign investment have collapsed during the tumult that has followed the ouster of President Hosni Mubarak two years ago.

Egypt’s reserves have fallen to less than $14 billion, from about $36 billion before the revolution, depressing the value of the Egyptian pound and raising questions about the government’s ability to import essential commodities like fuel and wheat. Egypt is in talks with the International Monetary Fund over a $4.8 billion loan package that could reassure other potential lenders about Egypt’s creditworthiness. But the negotiations have stalled over how much Egypt must raise taxes and cut subsidies.

The Libyan deposit is tantamount to an open-ended loan to Egypt. In similar arrangements, the depositor retained the right to withdraw the money, allowing Egypt to use it temporarily to pump up its currency supply.

In Libya, the reports of the arrests appear to be bolstering the popularity of Prime Minister Ali Zeidan, who is struggling to retain the support of Libya’s fractious transitional Parliament. Many Libyans resent the Qaddafi allies for the abuses and corruption under the former government, and some suspect them of working from Cairo to try to destabilize the new government.

Those arrested include Ahmed Qaddaf al-Dam, a cousin of Colonel Qaddafi’s; Ali Maria, the former Libyan ambassador to Cairo; and Mohamed Ibrahim, the brother of a Qaddafi spokesman, Moussa Ibrahim.

Citing an Egyptian security official, The Associated Press reported that the Libyan government had asked Egypt last year to arrest nearly 40 suspects, and that a delegation sent to Cairo on Thursday to arrange for extradition had brought a list of 88 more.

Mr. Qaddaf al-Dam is challenging his extradition on the ground that he holds an Egyptian passport because his mother was an Egyptian, from an area near the Libyan border, according to news reports. But he also faces Egyptian charges related to illegal weapons that the police say were discovered in his Cairo home.