FT reported that Egypt has asked the International Monetary Fund for a USD 3.2 billion standby facility to help shore up the economy, which has been severely damaged by a year of political turmoil that has frightened off tourists and investors.
An IMF mission started talks in Cairo and Ms Fayza Aboul Naga minister for international co operation said that an agreement was expected within weeks. She added that "We have asked the IMF for USD 3.2 billion in support."
It may be recalled that Egypt turned down an offer of a USD 3 billion package in June 2011, soon after reaching an initial accord with the fund, because the military council in power during the transition to elected rule said it did not want to leave a legacy of debt. The council also rejected USD 2.2 billion of loans from the World Bank.
Recently, however, officials have signaled they were considering going back to the fund amid feeble economic growth, a gaping deficit and the depletion of half the country's foreign currency reserves, which, analysts say, makes a devaluation of the Egyptian pound extremely likely and with it a surge in inflation.
Mr Gerry Rice, IMF's director of external relations, said that "The authorities are still updating their economic program and the visit will allow the fund to update our assessment and then we'll be working together to take it from there."
Economic growth for the June fiscal year is forecast to be 1.3% and the deficit could reach 10% of gross domestic product. The government has been relying on the domestic market to fund the deficit, but borrowing costs have soared above 15% as bank appetite for government debt wanes.
The Egyptian request to the IMF comes as the country reaches the end of multi stage elections for parliament, a crucial step in building a new political order after the toppling of Mr Hosni Mubarak in 2011.
Mr Samir Radwan, the former finance minister who negotiated last year's aborted agreement with the IMF, said that it was unlikely a deal would be finalized before there was more clarity on the country's political future. He said that, although the standby facility was small in comparison to the country's needs, reaching an agreement with the fund was key to obtaining credit from other sources.
He added that "It should not be underestimated because it gives the Egyptian economy a certification that the right policies are being followed."
Despite promises by Arab and western officials after the revolution to support the Egyptian economy during the transition, very few of the pledges actually materialized. Qatar and Saudi Arabia each gave USD 500 million in budget support and Mr Radwan said Gulf Co operation Council countries ceased to be interested in lending to Egypt after it turned down the IMF.
(Sourced from Financial Times)
