Egypt will increase its reliance on foreign borrowing to cover public spending needs and is reconsidering an IMF deal, minister of finance Hazem El-Beblawi said on Wednesday.
"In a short answer -- yes," was how Beblawi replied to a journalist's question on whether Egypt is reconsidering its decision to halt borrowing from abroad.
The minister was speaking at a conference on Public Private Partnerships (PPP) held at the British embassy in Cairo.
He refrained, however, from giving exact details on the amounts or the potential lenders.
“For now we have had more promises than real engagements,” Beblawi said, referring to Gulf countries that vowed generous aid packages to Egypt in the wake of the revolution.
Egypt has concluded a deal for $500 million of lending with Saudi Arabia and the same amount from Qatar, Beblawi explained. He did not, however, give details on the terms of borrowing.
In May, Saudi Arabia vowed to provide Egypt with $4 billion in aid, including a $1bn deposit at the Central Bank of Egypt and $500m in bond purchases.
On Wednesday, Beblawi said he was in talks on financing worth $5-$7 billion with Saudi Arabia and the United Arab Emirates, but he did not give a breakdown at the time of how much each would offer.
The African Development Bank has given Egypt a $500m loan for 2011 and the World Bank has granted a loan of $400m, he added.
More significantly, Beblawi suggested an IMF loan is back on the table.
"Everyone knows that the IMF has proposed a package of aid of $3.2 billion. At the time we were hesitant. Now we won't change our stand but we are changing our attitude," he said.
In June, Egypt signed an initial loan deal with the International Monetary Fund (IMF) but cancelled the agreement after the ruling military council rejected it, citing the "unfavourable conditions" attached.
The ministry of finance instead announced that Egypt would work towards cutting its deficit, financing it through local borrowing.
But last week, Beblawi -- who was appointed in mid-July -- accused local banks of asking for high interest rates in their bids for treasury bills, raising local borrowing costs. Beblawi said the government would look for other resources to lower its dependence on local banks.
Saudi Arabia said late September it was ready to invest in Egyptian treasury bills. The promise drove yields to below 13 per cent in an auction of LE6.5 billion of T-bills on 2 October.