Thursday, February 28, 2013
Egypt to invite IMF team on Thursday for loan talks
By Asma Alsharif and Shaimaa Fayed
CAIRO (Reuters) - Egypt will invite the IMF on Thursday to reopen negotiations on a $4.8 billion (3.2 billion pounds) loan, state newspaper al-Ahram reported, and the investment minister expressed hope that a deal could be done by the end of April.
International Monetary Fund support is seen as crucial to help ease an economic crisis rooted in two years of political turmoil that has depleted foreign currency reserves to critically low levels.
Egypt reached an initial agreement on the loan in November but postponed final ratification following political unrest in Cairo, which led the government to put off tax increases needed to rein in the budget deficit.
"Today, Thursday, a formal invitation will be sent to the technical delegation of the International Monetary Fund to come to Cairo to negotiate over the $4.8 billion loan to Egypt," Planning and International Cooperation Minister Ashraf al-Araby said in remarks reported by the state-run al-Ahram newspaper.
On its website, the paper also quoted him as saying he expected the delegation to arrive in Cairo "within 10 days".
Separately, Investment Minister Osama Saleh told journalists he expected the deal to be concluded by the end of April.
"We have hope, God willing, that we can, by the end of April complete the loan," he said. Saleh added that much of the work was done last year and recent changes to the government's economic reform programme amounted to "light amendments".
But April is sooner than many economists believe possible, with parliamentary elections due to begin in late that month and go on until late June. They believe the Muslim Brotherhood-led administration will be reluctant to conclude a deal including austerity measures ahead of the vote.
Fitch Ratings said on Wednesday the extended election timetable could delay the agreement until well into the third quarter. It had previously expected a deal in Q2.
MUFTI SAYS IMF BORROWING IS OKAY IN ISLAM
Egypt's foreign currency reserves fell to $13.6 billion in January, less than the $15 billion needed to cover three months' worth of imports to the country of 84 million people. Foreign exchange reserve figures for February are expected next week.
The budget deficit is meanwhile forecast to hit 12.3 percent of GDP by end-June unless economic reforms are implemented. Political unrest has caused the Egyptian pound to tumble 8.2 percent against the dollar since the end of last year, and the central bank is rationing the amount of dollars it sells to banks, prioritizing hard currency for essential food imports.
In a summary of its new plans for the economy released this week, the government said it aimed to increase the foreign currency reserves to $19 billion by the end of June, but did not say how. The plan will form the basis of talks with the IMF.
Assuming the government can conclude a quick agreement with the Fund, the deal may face other complications.
The Nour Party, Egypt's main hardline Islamist group, has said any deal must be approved by a body of senior scholars at Al-Azhar, a religious institution which should be consulted on matters related to Islamic law according to a new constitution.
Outgoing Grand Mufti Ali Gomaa said Islamic law had no problem with borrowing from the Fund, even though payment of interest on loans is deemed impermissible in Islam.
Gomaa said any funds would amount to "financing", not "a loan". "Calling it 'a loan' is wrong because we are partners in this bank and it is giving us this money in the manner of finance," he told Al Masry Al Youm, a daily newspaper.
(Additional reporting by Tom Perry and Ahmed Tolba; Writing by Tom Perry; Editing by Catherine Evans)