International Monetary Fund Managing Director Christine Lagarde (Photo: Reuters)
International Monetary Fund (IMF) Managing Director Christine Lagarde is due to arrive in Cairo Wednesday to reopen fresh discussions on a $3.2 billion fiscal package, after year-long negotiations between Egypt’s government and the international financial organisation.
Lagarde is expected to open the visit by meeting with newly-elected Prime Minister Hisham Qandil and his Cabinet's economic group, including representatives from the ministries of finance, planning and international cooperation and industry and external trade. She will then go on to meet President Mohamed Morsi for the first time since he assumed office.
Egypt’s Finance Minister Momtaz El-Said confirmed last Wednesday, that Egypt will be pushing for an increased loan of $4.8 billion, to help bolster Egypt’s flailing economy, which has seen widening state budget deficit and a balance of payment deficit largely stemming from a decline in tourism and shortage of foreign investment since last year’s popular uprising.
Foreign reserves have also fallen to well below half levels seen before the ouster of Hosni Mubarak.
Morsi’s administration will present Lagarde with a new economic programme that has an emphasis on “social justice”, Abdallah Shehata, economic advisor to the president, told Ahram Online last week.
Few details about the programme have been made public, however El-Said told Al-Ahram daily on Tuesday that one of the main focuses will be making subsidies more efficient by limiting waste and ensuring the financial support reaches the people in the most need.
Egypt’s initial financial plan, drafted by Kamal El-Ganzouri’s government back in February, was scrapped following political disagreements between the Muslim Brotherhood dominated parliament, Ganzouri’s cabinet and the military council, who were ruling the country.
Members of parliament said at the time that the programme did not include proposals to improve public security, reduce poverty or provide the revenue to raise wages.
Ironically, the finance minister who prepared the first programme prepared the second.
Historically, the stipulations attached to the IMF loans have been blamed for previous economic hardships the country has suffered. Some revolutionary groups, including "We are all Mina Daniel" named after a leftist Coptic activist killed during clashes with the military last year and the Egyptian Communist Party, will stage a protest outside the capital's Cabinet building on Wednesday calling for Egypt to reject the IMF's proposals.
Egypt has also been seeking regional funding over the course of the last 18 months. Qatar pledged to deposit $2 billion in the Central Bank of Egypt following a visit by the Emir of Gulf country to Egypt two weeks ago, a significantly small amount than the figure of $10 billion initially promised in 2011.
Added to this, Saudi transferred $1.5 billion as direct budget support and approved $430 million in project aid, while confirming Cairo could use a $750 million credit line to import oil products.
Economists, many of whom believe regional injections of cash are no substitute for an IMF loan, hope Lagarde’s visit will seal the IMF deal helping Egypt add credibility to economic reforms needed to restore investor confidence.
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