This content is not available in your region

Egypt in tough talks over IMF loan

Egypt in tough talks over IMF loan
Text size Aa Aa

A team from the International Monetary Fund will spend at least a week and maybe more in Egypt for difficult talks on a 3.7 billion euro loan desperately needed to avoid an economic crisis.

To get the money, Cairo has to convince the IMF it is serious about reforms to boost growth and curb an unaffordable budget deficit.

That implies tax hikes and politically risky cuts in the generous system of state subsidies for fuel and food, including bread.

After two years of political upheaval, Egypt’s foreign currency reserves have fallen to critically low levels, threatening its ability to buy wheat and fuel.

The IMF mission began by meeting finance ministry and the central bank officials and is expected to stay “a week or 10 days or more”, government spokesman Alaa El Hadidi told reporters. Prime Minister Hisham Kandil will meet the team when it has completed its work, he said.

An IMF deal has eluded Egypt for years, despite on-off talks by first the army-led government and now President Mohamed Mursi’s.

Economists say the IMF appears to question whether Egypt has the capacity to enact reforms in the face of the country’s political turmoil.

Just before the visit, the government announced an increase in the price of subsidised cooking gas. But it has postponed plans to ration subsidised fuel using smart cards until July 1 and some reports say that date may be pushed back.

The Egyptian pound has lost a tenth of its value against the dollar this year and is trading even lower on the black market, driving up inflation.

Shortages meanwhile threaten to increase tension in the street, where Mursi’s opponents have been airing political grievances in protests that frequently turn violent.