IMF and Egypt to meet for loan talks

CAIRO - Reuters

Egypt's President Mohamed Mursi (R) meets with IMF Managing Director Christine Lagarde at the presidential palace in Cairo, in this August 22, 2012 file photo. REUTERS photo/Amr Abdallah Dalsh/Files

An IMF delegation will arrive in Egypt tomorrow for talks with the government on a $4.8 billion loan, a government spokesman has said, as Cairo seeks to conclude a deal vital to easing a deep economic crisis.

Spokesman Alaa El Hadidi said March 31 that Egypt would not seek any emergency loan from the International Monetary Fund and faced no “crisis” in funding the import of essential commodities.

The most populous Arab country has been seeking a loan from the Fund to ease economic strains after two years of political upheaval. Reserves of foreign currency have fallen to critically low levels, threatening Egypt’s ability to buy in supplies of wheat, of which it is the world’s biggest importer, and fuel.

President Mohamed Mursi’s government initialed a deal with the IMF last November but postponed final ratification in December in the face of unrest triggered by a political row over the extent of his powers.
Hadidi, seeking to allay public concerns over power cuts and long queues at petrol stations, ruled out an emergency loan, as suggested by the IMF. He added that the country was still able to buy essential imports.

“(The supply) of wheat and loaves of bread is safe,” he told reporters. He added that indications of a higher harvest this year meant Egypt would use locally-grown wheat in the place of wheat that would otherwise have been imported.

He played down as “speculation” repeated media reports that Egypt was seeking aid from Arab states Libya and Iraq. “Egypt seeks to boost investment from these countries and an opening of their labor markets (for Egyptians),” Hadidi said.

The IMF said last week a technical delegation would visit Cairo in the “first days of April”.

Masood Ahmed, director of the IMF’s Middle East and Central Asia department, visited Cairo on March 17, saying the Fund would continue talks aimed at agreeing possible financial aid.

IMF deal to bring austerity measures

Any deal with the IMF is likely to require Egypt to commit to austerity measures, a very sensitive issue at a time when Mursi is facing protests over his management of the country.

Shortages of subsidized diesel have paralyzed transport in parts of Egypt, as the Egyptian pound has lost 9 percent of its value against the dollar since late last year.

The government is working on an economic program where it plans to cut back on subsidies of fuel. Last year it eliminated subsidies on 95-octane gasoline, the highest grade available, and it raised fuel prices in many sectors last month.

Mursi’s cabinet has said it plans to implement a subsidized fuel rationing system at the beginning of July, though local media reports have said the plan, already delayed several times, could be pushed back to January.

The unrest of the past two years has driven away tourists whose spending accounted for around a tenth of GDP before the uprising. Hadidi said the number of tourists in February was 845,000, a 12 percent increase compared with a year earlier.