Consensus needed on Egypt's IMF loan - John Kerry
American Secretary of State John Kerry, currently in Egypt for talks with the government, is to stress the importance of Egypt achieving political consensus for painful economic reforms needed to secure an IMF loan, a senior US official said on Saturday.
Kerry arrived in Egypt on his first visit to the Arab world since taking office for talks with the leaders of a country mired in political and economic crisis two years after the overthrow of autocrat Hosni Mubarak.
With Egypt’s pound and foreign currency reserves sliding, the official said that if Cairo could agree on a $4.8 billion loan from the IMF, this would bring in other funds from the United States, European Union and Arab countries.
Egypt’s extended election timetable could continue to delay a $4.8 billion IMF loan agreement until the third quarter, Fitch Ratings said on Wednesday, warning that such a deal is becoming more pressing as financial conditions deteriorate.
In a statement, Fitch said a deal with the International Monetary Fund was vital for a sustained improvement in Egypt’s balance of payments, and to prevent uncontrolled currency depreciation.
“The need for an IMF deal is becoming more pressing in the absence of further pledges of bilateral support beyond a reported agreement by Qatar to buy $2.5 billion of Egyptian T-bonds in March,” it added.
The rating agency said it had expected Egypt to reach an agreement with the Fund in the second quarter of 2013.
The International Monetary Fund (IMF) and the Egyptian government have announced they are to resume talks next month on a loan deal that could help ease Egypt’s budget deficiencies. It comes as pensions in the country are not being paid as a result of no money in the coffers.
The country’s investment minister Osama Saleh said on Monday that talks over the loan agreement would resume again in a few weeks.
“There have been pledges of international and regional support to Egypt and most of these are in progress,” Saleh said in a speech at a financial conference. “Negotiations with the IMF over the $4.8 billion loan will resume in early March,” he said.
Saleh said an agreement with the IMF had almost been in place in December but that a change in public opinion meant it collapsed. That was largely due to the proposed tax hikes that most Egyptians would be unable to pay for, leaving dissent high and causing the government to backtrack.
“We don’t see any reasons why the Egyptian people should reject the program. They will eventually realize that the benefits they will get will outweigh the load they will carry,” he said.
The IMF’s Middle East and Central Asia Director Masood Ahmed was quoted by local press as saying the international financial body is currently in a review of the government’s new procedures for reducing its deficit.
That is a prerequisite for resuming talks to ultimately finalize and sign the loan deal.
“Egypt’s government is determined to move forward and is fully cooperating to seal the loan deal, there are just a few minor complications that it needs to overcome before it can receive the loan,” explained Ahmed.
Ahmed added that the IMF must be fully convinced that Egypt will be able to fully implement the loan program before it can give a final agreement on the loan, Egyptian state-run news agency MENA reported.
In December, Egypt asked the IMF to postpone the loan deal worth $4.8 billion as it did not want to implement tax increases that enraged many Egyptians across the country.
The tax increases were part of IMF stipulations for the loan agreement, which was approved recently by the international development organization.
- Trouble getting them, trouble keeping them? Middle East firms challenged in attracting, retaining talent
- Does capitalism provide a solution to terrorism?
- No pain, no gain: Tunisian economy needs three years of tough love before rebounding
- How will MENA economies look in 2015?
- Sanctions face-off: Iran to unveil its corporate side in London next week