IMF loan talks with Egypt on hold amid political changes

Ahram Online, AFP, Friday 12 Jul 2013

Negotiations for proposed $4.8 billion IMF loan have been temporarily suspended amid ongoing political upheaval in Egypt, Turkish news agency Anadolu reports

International Monetary Fund's Chief Christine Lagarde (Photo: Reuters)

Negotiations between Egypt and the International Monetary Fund (IMF) for a proposed $4.8 billion loan are currently on hold, Turkish news agency Anadolu reported on Thursday, citing Egyptian Finance Minister Fayad Abdel-Moneim.

Anadolu went on to report that loan talks had been halted until Egypt could inform the global lender about the latest internal economic developments.

According to Abdel-Moneim, the IMF would have sealed the long-awaited loan to cash-strapped Egypt if sales tax laws had been ratified by the now-dissolved Shura Council (the upper house of Egypt's parliament).

In March, Egypt had planned to raise sales taxes on six goods in an effort to raise state revenues by around LE13 billion (roughly $2 billion), in hopes of curbing the budget deficit to meet IMF loan preconditions.

Egypt's budget deficit hit LE205 billion (roughly $29.2 billion) – representing 11.8 percent of GDP – in the first 11 months of the 2012/13 fiscal year, the finance ministry reported in June.

On Thursday, AFP reported that the IMF had said it had no contact with Egypt's interim government, but that technical-level talks remained ongoing.

IMF spokesman Gerry Rice said the IMF was considering the implications of last week's military coup on Egypt's loan prospects.

"We have not been in touch with the interim government but we are in contact with our counterparts at the technical level," Rice said at a regularly scheduled news briefing.

The IMF spokesman declined to say whether Egypt might need more than the proposed $4.8 billion after a military coup ousted president Mohamed Morsi last week and as the new leadership tries to draw up a government amid deadly unrest.

"We'll just have to wait and see," Rice said.

In late June, IMF Managing Director Christine Lagarde said the proposed IMF aid programme would not meet the country's needs.

"I very much hope that we can find the… terms under which we can reach conclusion with the Egyptian authorities, where we have efforts on their part to address the key issues, support of the international community to participate in the financing, because the IMF financing will not be enough," she said. 

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