Egypt expects to sign a $3.2 billion loan agreement with the International Monetary Fund (IMF) next month and will receive one-third of the funds immediately upon signing, Finance Minister Mumtaz El-Saeed was quoted as saying on Sunday.
The loan accord would be signed during a visit to Egypt in March by IMF regional director Masood Ahmed, Al-Ahram daily newspaper quoted him as saying. Egypt would receive another one-third of the loan in three months and the final one-third in six months.
The loan, which has an interest rate of 1.2 per cent, would be used to support the 2012/13 budget and to compensate for the depletion of Egypt's foreign reserves, Al-Ahram quoted Saeed as saying.
Egypt's foreign reserves dropped to $16 billion at the end of January; hence the country's dire need for foreign currency. The sharp drop in reserves was quoted by the S&P rating agency as the main reason behind its latest downgrade of Egypt's long-term credit rating.
Egypt last month began negotiating the $3.2 billion package to plug widening budget and balance of payments deficits caused by the economic and political turmoil of the past year. Egypt said it wanted to seal an accord within weeks.
The IMF has said Egypt would have to line up substantial commitments from international donors before it would agree to any financial package. Economists estimate that Egypt needs about $10-12 billion in external funding over the next year and a half.
Al-Ahram quoted Saeed as saying that Egypt was negotiating with the World Bank for another $1 billion, but the fate of economic aid promised by several Gulf states was still not clear.
Any loan agreement would have to be subsequently approved by the IMF's board of directors, the IMF has said.
Egypt rejected a similar IMF loan in June 2011, citing the military rulers' reluctance to increase the country's foreign exposure. Mounting pressures on the country's finances, however, forced officials to rethink the IMF offer.