Egypt is open to IMF funding but the country has not made any formal request for aid after turning down a financing package in June, the finance minister said Monday. Minister Hazem al-Beblawi said last week local lenders had nearly reached the maximum they could lend to cover the budget deficit and said Egypt would have to seek funds from abroad. Cairo has been in talks with Gulf states about support.
When Egypt turned down the $3.2 billion package from the International Monetary Fund in the summer, then the finance minister – since replaced by Beblawi – said Egypt would rely on domestic sources and that the ruling army was wary about building up debts. An IMF team has been in Egypt to assess financing needs. But an IMF official said last week that the institution had not received any official request for cash from Cairo. “There is no formal negotiation yet. They are looking at the situation,” Beblawi told Reuters, adding that the IMF team was still in Egypt. “They will continue to the end of this week. It is a routine visit, consultation, and we are discussing all possibilities, but the formal negotiation or a request from Egypt has not been made,” he said.
Egypt’s economy has been hammered by an uprising that toppled Hosni Mubarak in February and ongoing uncertainty about the shape of a future government after a parliamentary election that starts Nov. 28. The army will still be in charge until a presidential vote, a date for which has yet to be set. The growth rate has slowed sharply and the budget deficit is forecast by the government to be 8.6 percent of gross domestic product in the financial year 2011/12. Economists say the actual deficit may turn out to be bigger.
Asked whether Egypt wanted to renew the $3.2 billion package, Beblawi said: “We were not discussing any details at this moment. We were discussing the possibility, what is their advice and the possibility of renewing their proposal but we have not discussed any details.” Egypt has received $1 billion budget support from Saudi Arabia and Qatar and has been negotiating much bigger aid packages that would cover budget, projects and other aid. Beblawi said there were no fresh developments in those talks.
The United Arab Emirates said this month it planned to provide $3 billion in financial aid to Egypt but was still discussing the mechanism to deliver it. Some diplomats say Saudi Arabia may be reluctant to give cash to Egypt over the treatment of its former ally, Mubarak, who is now on trial for the killing of protesters. During his trial, Mubarak has been put in a cage in court.
The diplomats say it sets an unwelcome precedent in a region where many countries are run by longtime rulers or monarchs, despite uprisings that have ousted leaders in Tunisia, Egypt and Libya.