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Egypt reaches $4.8bn loan agreement with IMF
Agreement is reached with IMF technical team for $4.8 billion loan facility, fund announces Tuesday
Ahram Online, Tuesday 20 Nov 2012
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 Egypt signs initial loan agreement with IMF
Egypt's President Morsi meets with IMF Managing Director Lagarde at the Presidential Palace in Cairo , August 2012 (Photo: Reuters )

Egypt has reached a staff-level agreement with the International Monetary Fund's technical team, currently on a visit to Cairo, for a $4.8 billion loan, the fund announced Tuesday.

The agreement is expected to open the door to some $14.5 billion in financing to allow Egypt to implement an economic programme that it has proposed to the IMF.

The IMF said in a statement that agreement had been reached for "a 22-month Stand-By Arrangement (SBA) in the amount of about $4.8 billion (equivalent to about 3.16 billion SDR [Special Drawing Rights], or 335 per cent of Egypt's quota in the IMF)."

The loan proposal will be presented to the IMF's board of directors for final approval on 19 December, according to Hany Kadry, assistant to Egypt's finance minister who is responsible for IMF negotiations.

The first tranche of the loan is expected to be disbursed immediately after the board's approval is secured.

The loan will bear an interest rate of 1.06 per cent. Additional fees will also be attached to the facility, Reuters reported.  

An IMF technical team arrived in Cairo some two weeks ago to discuss Egypt's economic programme, which will accompany the loan agreement.

To date, the Egyptian government has not disclosed any details of the programme.

Ashraf El-Arabi, Egypt's minister of planning and international cooperation, said the government would announce details of the loan on Wednesday.

The IMF, for its part, described what Egypt could expect following finalisation of the loan agreement.

"The [Egyptian] authorities' programme will be supported by a financing package of $14.5 billion in loans and deposits on favourable terms from a range of bilateral and multilateral partners, including the IMF," Andreas Bauer, chief of the IMF's Middle East and Central Asia department, said in a Tuesday statement.

To cover its widening budget deficit, Egypt currently borrows from the local market at rates as high as 15 or 16 per cent.

Fiscal consolidation is a "key pillar" of the economic programme, which would be carried out by instituting tax reforms and restructuring subsidies, according to the IMF.

Egypt's cabinet said in a statement on Tuesday that its programme aimed to cut the budget deficit to 8.5 per cent of GDP by 2013/14, down from the 11 per cent expected in the current 2012/13 fiscal year.

"The top tax rate will not change, but new tax brackets will be added and the exemption level will increase," the finance ministry's Kadry told Ahram Online.

Earlier this month, Egypt's cabinet approved a new tax bracket of 22 per cent for annual incomes between LE1 million and LE10 million.

Kadry explained that the other main feature of Egypt's economic programme was its focus on cutting fuel subsidies, a policy that the current cabinet has discussed intensively since its appointment this summer.

As for monetary policy, Kadry declined to comment, saying the matter was in the hands of the Central Bank of Egypt.

The IMF did not reveal any details of the proposed monetary measures, including the prospect of a possible devaluation of the Egyptian pound.

"Monetary and exchange rate policies will be geared towards ensuring declining inflation over the medium term; enhancing Egypt's international competitiveness to stimulate trade and attract capital inflows; and increasing international reserves to protect against external shocks," the IMF statement read.



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Ben Youcef Bedouani
21-11-2012 05:56pm
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All the best to the Egyptian people
Hi fellas, the remaining text of my message: Having said that, while I respect the “decision” of the Egyptian Government to ask for an IMF loan, at a low interest rate (1%) thus decreasing/eliminating its prohibitive 15%-16% local loans, I am still very sad that this particular loan was not granted by the rich Arab countries to help Egypt in this difficult period of time. Everybody know that the IMF loan has its “political and social” counterpart! It goes without saying. The question is: where are the “supposedly rich” Arab countries? The oil and gas producers… Saudi Arabia, Qatar, Algeria, UAE, Kuwait… have enough financial resources to grant a loan to Egypt – as well as to other Arab countries in the need – at no interests. Why letting Egypt, this key Arab country internationally, a huge and respected civilization, in the position of asking for loan to the IMF? How can then Egypt be in the position to help rise the Palestinian long-term pending crisis if the country itself
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Mr justin olivia
18-12-2012 07:29pm
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LOAN OFFER======APPLY NOW?
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3



Karim
21-11-2012 04:46am
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Body-language
Look at the Body-language of Mrs. Legarde. She crossed her Arms. It`s defensive. It symbolize rejection.
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Ben Youcef Bedouani
20-11-2012 06:42pm
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All the best to the Egyptian people
I am delighted to hear about the Egyptian Government’s national program to promote economic recovery to address the country’s fiscal and balance of payments deficits. This program will also hopefully lay the foundation for rapid job creation which is the key component to address social challenges. You have put in place under this challenging program various reforms, mainly fiscal, that will certainly help reduce expenditures, reforming energy subsidies as well as balancing the tax revenues. Egyptian people deserve to have quality jobs, be healthy with great education, and have a decent life in a democratic and open society. Please do not jeopardize your revolution! As an Algerian, I wish all the best to Egypt and I deeply want to see this wonderful country (I have never visited) back on the international scene. A strong and democratic Egypt would help all Arab countries especially in this very crucial time of international tensions. We need a powerful Egypt on our side. Having s
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Aladdin, Egypt
20-11-2012 05:42pm
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Public Health & Carbage
It should be first riority to save millions on unnecessary diseases and misery while generating energy by aenarobic digesters.Protecting our norhtern lakes from pollution and inceased fishery is a must. Use of alternative energy sources (solar, wind, etc.) is vital. Educating Egyptians is must. And the list goes on. AllahAKber.
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Karim
21-11-2012 04:41am
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You are living in La La Land
You are living in La La Land. This things did not done even in the US. Egypt is a third world country. No president on earth can turn a corrupt, polluted, illiterate, lazy (be true to yourself) and poor third World Country with a population of 90 million people and lack of resources into an Industrial Nation of the first World in a few Years. It`s simply illogical. Especially with a broken Self Esteem.

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