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Egypt's spat with Qatar is a 'matter of principle'

  • The ongoing political rift between Qatar and Arab governments is "a matter of principle", said Egypt's Minister of Finance Amr El-Garhy.
  • Regarding Egypt's economy, El-Garhy was optimistic that inbound tourism would soon recover and reaffirmed commitment to IMF reforms.

Cairo isn't worried about a potential financial fallout from its political rift with Doha, Egypt's Minister of Finance Amr El-Garhy told CNBC on Friday.

"It's not a matter of a loss of money...it's a matter of principle," he said on the sidelines of the Asian Infrastructure Investment Bank's second annual meeting in Jeju, South Korea.

Egypt, alongside six other Middle Eastern countries including Saudi Arabia, Bahrain and the U.A.E, severed ties with Qatar last week, accusing the oil-rich monarchy of supporting terrorism. The Gulf governments are particularly wary of Doha's relationship with Iran and the Muslim Brotherhood, a non-violent organization, as President Donald Trump urges Arab leaders to take a stronger stance against extremists. Doha has repeatedly denied allegations of funding terrorism.

Earlier this week, Qatari Finance Minister Ali Shareef Al Emadi told CNBC in an exclusive interview that if his country lost a dollar from this crisis, so would other Gulf Cooperation Council nations. But Egypt's El-Garhy wasn't fazed and insisted that Doha's terror links, not the economic fallout, was the primary issue at hand.

"We are very reasonable and rational," he said referring the coalition of Gulf states involved in the dispute. If countries take such a strong stance against a neighbor, there must be a strong reason behind that and the other party must be very careful about its response, he continued.

Egypt, Saudi Arabia, Bahrain and the U.A.E "will decide together what needs to be done in the coming future," he added.

Egyptian President Abdel Fattah Al-Sisi recently called for Gulf leaders to boycott Turkey as well, suggesting that cutting ties with Ankara could increase pressure on Doha. Strategists widely believe Qatar will turn to Turkey and Iran to mitigate the pain from the economic blockade imposed by the Gulf coalition but El-Garhy refused to comment on Al-Sisi's remarks.

Regarding the domestic economy, Egypt is on track to receive the second tranche of its IMF loan— $1.25 billion — within the next few weeks, El-Garhy stated.

Cairo must lower its inflation rate and eliminate energy subsidies, according to the IMF's loan conditions, and El-Garhy said his government was committed to both reforms, noting that the central bank is expecting 13 percent inflation in 2018, versus 30 percent today.

He was also optimistic that inbound tourism would recover after a string of incidents, including April's deadly bombings of Coptic churches in holiday hotspot Alexandria, hindered visitor arrivals.

In 2015, the bombing of a Russian plane that took off from the popular Egyptian resort town of Sharm el-Sheikh led the U.K. to suspend flights to the tourist destination and resulted in Moscow stopping flights to Egypt entirely.

"The decision by the Russians and the British affected us a great deal in 2016, we hope they come back from that decision soon," El-Garhy said. "We've abided by all their requirements in terms of security at airports, so we believe in the coming period tourism will come back in a strong way."