Egypt's parliament  has overwhelmingly rejected proposed spending cuts, throwing into uncertainty the country's plans to obtain a US$3.2 billion (Dh11.8bn) International Monetary Fund (IMF)  loan.
The International Monetary Fund (IMF) requires consensus within Egypt's leadership on an economic plan before the lender agrees to release the funds to help the country avoid a looming fiscal crunch. "It will not be easy for the government to cut spending now, as most of the spending is on public wages and subsidies, which are key to maintaining social stability," said Walid Sayegh, an economist at Blominvest Bank.
The Islamist-dominated parliament has been debating the plan, put forward by the military-appointed cabinet, for almost two months, with discussions spanning 10 sessions. But on Tuesday, only six of 365 lawmakers approved the plan. Some complained that the plan did not improve public security, cut poverty or provide revenue to raise wages, Reuters reported.
The disagreement is the latest twist in a lengthy and often bitter dispute among politicians about both the loan  and the required reforms linked to the cash. Optimism about a deal rose the day before, when Momtaz l Saieed, Egypt's finance minister, was quoted as saying parties had approved the loan, opening the way for the first tranche to flow next month.
But parliament's rejection of spending cuts suggests more obstacles lie ahead. It reflects the challenge facing the interim government as it tries to gather support for controversial proposals to scale back subsidies and raise taxes before the first round in the presidential election next month.
Subsidies on fuel and bread have become vital to Egyptians. Additional benefits are also woven into the wages of some public-sector workers. But the subsidies are a huge strain on the government's budget, accounting for as much as 10 per cent of Gross Domestic Product (GDP) .
Egypt needs the International Monetary Fund (IMF) cash  to help in plugging a deficit expected to widen to 150bn Egyptian pounds (Dh91.01bn) by the end June. But the loan would only partially cover the projected $11bn of financing that Egypt will need over the next two years.