The growing popularity of a strange form of debt diplomacy

up with the Egyptian pound on October 27th. Since Russia invaded Ukraine, prompting foreign investors to flee risky assets, the country’s central bank has burnt through its foreign reserves in a bid to keep the currency fixed against the dollar. But last week officials agreed to float the pound—the first of several concessions to secure a $3bn loan from the . The currency promptly fell off a cliff, plunging to an all-time low.Now Egypt faces the task of rebuilding its foreign reserves. The country’s expected current-account deficit and debt repayments over the next 18 months are roughly the same as its $33bn of reserves. Tapping international debt markets is out of the question. Economic turmoil will ward off foreign investors. Thus Cairo will probably turn to old friends in the Gulf. Between October 2021 and March this year, Kuwait, Saudi Arabia and the lent Egypt $18bn to sit in its foreign reserves. The reports that another package worth $5bn is in the works, although it has not said where the money will be coming from.