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IMF team discusses rescue package with Egypt officials in Cairo

Egypt needs to prove it can meet conditions for $4.8 billion loan after it turned down offer of emergency aid, the US state department said ahead of the IMF team's arrival in Cairo

Ahram Online, Sunday 17 Mar 2013
Morsi and Lagarde
Egypt's President Mohamed Morsi (R) meets with IMF Managing Director Christine Lagarde at the Presidential Palace in Cairo (Photo: Reuters)
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An International Monetary Fund (IMF) delegation arrived in Cairo late on Saturday to resume talks on a $4.8 billion loan to Egypt, reports state-owned news agency MENA.

Egypt's preliminary agreement with the IMF over the loan was scraped in December 2012 after President Mohamed Morsi's government failed to implement the economic reforms upon which the loan was conditional.

Negotiations over the much-needed rescue package are likely to be tough. The IMF's offer of smaller, stop-gap funding to Egypt last Monday seemed to indicate it did not envisage granting Egypt the larger loan in the near future.

"The IMF, I think, was concerned that it would take more time for Egypt to be able to take the difficult steps," US State Department spokesperson Victoria Nuland said in a press release on Thursday.

Cash-strapped Egypt refused to sign onto any "emergency" loan with the fund's Rapid Financing Instrument, cabinet spokesman Alaa El-Hadidi said last Tuesday.

Egypt’s budget deficit increased by 35.8 percent to LE119.8 billion ($17.7 billion) from July to January of the 2012/13 fiscal year, compared to the corresponding period of the previous year.

"If the Egyptians want to bear down and try to do the full standby [loan], and they can meet the terms that the IMF feels are necessary, then we will applaud that. But if they can’t and they get stuck again, then we’ll obviously encourage them to look at other ways forward," added Nuland when asked whether Egypt should take the interim loan.

The Egyptian government invited the IMF back to Cairo for talks after it unveiled a new economic reform programme in late February designed to meet the fund's conditions for the loan.

Further political uncertainty provoked by a court-ordered delay of parliamentary elections, previously set to start on 22 April, throws yet another spanner in the process of securing the loan, the implementation of which the IMF insists requires political consensus.

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