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Posted On: 07/04/2012
Egypt is planning to sign an agreement with the International Monetary fund for a $3.2 billion loan by early summer, according to the Minister of Planning and International Corporation, Fayza Aboulnaga. Once the memorandum of understanding has been signed, Egypt will be able to access half of the loan, but the IMF still has to gain backing from all the major political groups in the country before it will grant approval.
Although Egypt needs the loan, not all the political groups are in agreement as the Muslim Brotherhood which holds 47% of the seats in parliament, wants to ensure all other possibilities of funding the loan through domestic markets have been exhausted before the government takes on any more additional debt. The Brotherhood is worried that the government’s current economic program which has been submitted to the IMF during negotiations is too vague.
Egypt applied to the IMF for the loan as it needs to cover the current budget deficit, and its foreign currency reserves are currently too low. It hopes reaching an agreement with the IMF would encourage more investment into the country, and could lead to other donors making good on aid promises.
According to the central bank of Egypt, net international reserves dropped to $15.1 billion in March, down from $15.7 billion in February and $36 billion at the end of 2010. Egypt applied before the loan in January having turned down a similar offer from the IMF last year.
It is hoped the loan agreement will be finalised during the next couple of months provided it can be shown to have broad support. It remains to be seen how likely this is to happen, as according to the latest reports a political group is currently impeding progress.
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