Tuesday, April 16, 2013
IMF team leaves Egypt without concluding a deal about loan
Fuel shortage in Egypt: buses, microbuses and pickups queue for diesel.
A team from the International Monetary Fund concluded a two week visit to Egypt on Monday without signing a deal on a much-anticipated $4.8 billion loan, Andreas Bauer, mission chief for Egypt, said in a statement issued Monday after midnight Cairo time.
The last time an IMF technical team was in Cairo in November 2012, a 'staff level agreement' on the same $4.8 billion facility was signed. However, the loan deal did not come through that time, at the Egyptian government's request.
The IMF mission arrived in Egypt on 2 April and met with top Egyptian officials including the prime minister, the central bank governor, ministers of finance and planning as well as leaders of several political parties. Discussions were based on an economic programme that Egypt prepared to secure the loan, which involves measures to tackle the budget deficit, including the diminution of government subsidies on a number of items like fuel and bread.
Neither side said why there had been no agreement, but analysts said the ruling Muslim Brotherhood did not want to risk unpopular measures that could hit poor and middle-income Egyptians before parliamentary elections expected from October.
I don't think they will do any meaningful reform before the elections. That's the bottom line," said Samir Radwan. As the first finance minister after the overthrow of former president Hosni Mubarak in 2011, Radwan negotiated a $3.2 billion IMF loan with fewer conditions at the time, but the military council that ruled Egypt then vetoed it. Since then, foreign reserves have more than halved to the critically low level of $13.4 billion, the Egyptian pound has lost about 10 percent against the dollar, tourism and investment have withered and the country faces fuel shortages and power cuts. An IMF programme could help stabilise the economy in the rocky transition to democracy, unlocking up to $15 billion in aid and investment to improve a dismal business climate.
Egypt secured $5 billion in stopgap financial support from Arab allies Qatar and Libya last week, removing some of the sense of urgency about obtaining the IMF loan. Economists said the government could muddle through for several months with funding from Arab sources, but only an IMF agreement would restore business confidence and investment.
By contrast Tunisia, where the ousting of dictator Zine Al-Abidine Ben Ali in January 2011 helped inspire the Egyptian uprising in what became known as the Arab Spring, is set to sign a $1.78 billion loan deal with the IMF on Tuesday, a government source in Tunis told Reuters. The IMF and the international community want to help but are really frustrated that Egypt isn't doing as much as it should to help itself," said Angus Blair, chairman of the Signet Institute, an economic think-tank for the Middle East and North Africa region. "I expect there is significant frustration."