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IMF says Egypt budget gap worrying, talks to be continued

IMF is ready to resume talks with Egyptian government once it completes a review of its economic programme

Reuters, Wednesday 22 May 2013
Director of International Monetary Fund's Middle East and Central Asia department, Masood Ahmed (Photo: IMF/Thomas Dooley)
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Egypt's worsening fiscal gap is a concern but the International Monetary Fund (IMF) is still ready to continue talks on a $4.8 billion loan once Cairo completes a review of its economic programme, a senior IMF official said.

"We are ready to engage with them on reviewing and finalizing the programme as soon as they completed it," Masood Ahmed, IMF Director for the Middle East and North Africa, told Reuters in an interview on Tuesday.

Negotiations with the IMF have stumbled repeatedly over the Islamist-led government's resistance to the austerity measures needed to get Egypt's soaring fiscal deficit under control.

The IMF expects Egypt's budget deficit to widen to 11.3 percent of gross domestic product in the fiscal year, which ends in June, the largest gap since 2002, from 10.7 percent in the previous year, it said in a regional outlook published earlier on Tuesday.

"It is a source of concern because it adds pressure on the financing requirements for the Egyptian economy domestically," Ahmed said after presenting the regional outlook in Dubai.

"It's an additional source of crowding out financing for the private investment. Of course, that's one of the reasons the authorities are reviewing their numbers," he said.

The IMF sees Egypt's budget gap narrowing again to 8.7 percent in the fiscal 2013/14, its report showed.

An IMF deal would help shore up investor and donor concerns after two years of political instability since the overthrow of president Hosni Mubarak, showing that Egypt is committed to reforms such as cutting fuel subsidies and raising sales taxes.

It is hard to say when the Egyptian authorities are going to finalize the programme review, Ahmed said, adding the IMF could conclude negotiations relatively quickly.

"I think the work (on the programme review) is advanced but it is up to them to take steps that will bring it to conclusion," he said.

Ahmed told the presentation that the reason why the IMF was emphasizing the broad political support for the government reform programme was to increase odds that it will go through: "The driver of this is the need to have a higher probability ... that the measures that are proposed will be implemented."

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