Egypt needs to do more to ‘secure IMF aid’

Egypt needs to do more to secure a $3.2bn loan from the International Monetary Fund, including gathering broad political support and identifying other sources to finance its funding gap of up to $12bn, an IMF official said yesterday.
Masood Ahmed, IMF director for the Middle East, told Reuters that Egypt still needed to do “some technical work” to finalise its economic programme.
Asked whether he thought there was enough domestic political support for the programme, Ahmed said: “I think that process (of getting political support) is advancing but I do not think we are at the point yet where we could move forward.”
“There’s still more work to be done to close down those three areas,” he said, referring to the economic programme, political support and alternative financial sources.
“We are ready as soon as pillars are there for that programme to move forward relatively quickly,” Ahmed said after presenting the regional economic outlook in Dubai.
Egypt and the IMF are in discussions on a $3.2bn loan programme, which Egypt had requested earlier this year but which had been opposed by the powerful Muslim Brotherhood’s Freedom and Justice Party.
Egypt’s $236bn economy has been laid low by 18 months of political turmoil.
Last week, parliament overwhelmingly rejected the army-appointed cabinet’s plan to cut state spending, hampering the government’s efforts to secure IMF help needed to avoid a fiscal crisis and potential currency devaluation.
“Egypt has pressing economic and financial challenges and that’s why we believe it is important to move forward now to finalise the content of the programme, to get support for it and to mobilize the financing for it,” Ahmed said.
The country’s finance minister said last week the government expected the Fund’s aid to start flowing from May.
The IMF is insisting that any agreement on financing is backed by Egypt’s government and political partners ahead of presidential elections later this month. This would ensure the deal would outlast the political transition following the polls.
The IMF expects Egypt’s inflation-adjusted economic growth to ease to 1.5% this year, which would be the slowest pace since a 0.3% expansion in 1992 and down from 1.8% in 2011. Its fiscal gap should widen to 10% of gross domestic product in 2012, from 9.9% last year.
Egypt has said it expects Saudi Arabia to deposit $1bn at the Egyptian central bank by the end of April as part of a $2.7bn package to support Egypt’s battered finances.
Egypt’s foreign reserves have tumbled by more than $20bn to $15bn during a year of political turmoil following the ouster of Hosni Mubarak.
Ahmed also said the IMF would consider further aid for Yemen after approving a $93.7mn loan for the poorest country in the Arab world in April, which was aimed at addressing an urgent balance of payments deficit.
“It’s hard to say yet (what the financing needs will be). But clearly the financing requirements for Yemen to embark on the programme of expanding employment and the economy will be significantly larger than the current phase of how to stabilise the economy after the crisis,” he said.
Yemeni officials have previously said the public sector would play a key role in job creation as the country attempts to stave off economic collapse after 15 months of political turmoil that saw President Ali Abdullah Saleh forced from office.
“In that context, that they move to the medium-term strategy the IMF would also consider how to support and accompany them during that process, including by providing financial support over a longer-term period and with amounts that are likely to be larger than the amount, we had so far provided for the immediate stabilisation,” he said.
“The fiscal situation deteriorated significantly, this year, we believe it will stabilize,” Ahmed said.