CAIRO (Reuters) - The United Arab Emirates (UAE) announced on Monday a $3 billion aid package to Egypt, the state news agency WAM said.
The agency said the announcement was made by Deputy UAE Prime Minister Sheikh Mansour bin Zayed al-Nahayan during a meeting with Egyptian Prime Minister Essam Sharaf in Abu Dhabi, his first visit to the oil-producing Gulf Arab state since an uprising ousted President Hosni Mubarak in February.
"According to these instructions, it was decided to set up the Khalifa bin Zayed Fund to support medium and small projects in the Arab Republic of Egypt to the value of $1.5 billion, with the aim of creating job opportunities for Egyptian youth," WAM said.
Sheikh Khalifa also ordered the allocation of $750 million for infrastructure and housing projects for youths and $750 million more in soft loans for various projects, the agency said.
Egypt, whose economy contracted in the first six months of 2011, approached the IMF and international donors in early May to help it plug an estimated $11 billion balance of payments gap in 2011/12 caused by the political turmoil.
Finance Minister Samir Radwan, also on a visit to Abu Dhabi, said on Monday that Egypt plans to fund its 134 billion pound ($22.47 billion) budget deficit through a combination of local market issuance and with aid from Arab states.
Egypt had sealed a $3 billion financial package from the International Monetary Fund on June 5 to shore up its finances after protests that ended Mubarak's 30-year rule scared away tourists and investors, two of its main sources of foreign exchange.
After securing the package, Radwan said the country would not need to borrow after all from the IMF or the World Bank, which had also offered a large lending package, asserting that the shortfall could now be covered locally and from foreign aid.
The government forecasts that its revised budget will cut the deficit for the fiscal year starting July 1 to 8.6 percent of annual economic output from a previously predicted 11 percent, but has given few details of how it will achieve this.
The World Bank had said it would offer $4.5 billion over the next 24 months, including $1 billion to help cover next year's budget shortfall. It now says it will review the plans after Egypt said it no longer wanted the IMF money.
($1=5.962 Egyptian Pound)
(Reporting by Ali Abdelatti in Cairo and Stanley Carvalho in Abu Dhabi; Writing by Sami Aboudi; Editing by Michael Roddy)