DUBAI: Egypt needs to do more to secure a $3.2 billion loan from the International Monetary Fund, including gathering broad political support and identifying other sources to finance its funding gap of up to $12 billion, an IMF official said Wednesday.
Masood Ahmed, IMF director for the Middle East, told Reuters that Egypt still needed to do “some technical work” to finalize its economic program.
Asked whether he thought there was enough domestic political support for the program, Ahmed said: “I think that process [of getting political support] is advancing but I do not think we are at the point yet where we could move forward.”
“There’s still more work to be done to close down those three areas,” he said, referring to the economic program, political support and alternative financial sources.
“We are ready as soon as pillars are there for that program to move forward relatively quickly,” Ahmed said after presenting the regional economic outlook in Dubai.
Egypt and the IMF are in discussions on a $3.2 billion loan program, which Egypt had requested earlier this year but which had been opposed by the powerful Muslim Brotherhood’s Freedom and Justice Party.
Egypt’s $236 billion economy has been laid low by 18 months of political turmoil.
Last week, parliament rejected the army-appointed Cabinet’s plan to cut state spending, hampering the government’s efforts to secure IMF help needed to avoid a fiscal crisis and potential currency devaluation.
“Egypt has pressing economic and financial challenges and that’s why we believe it is important to move forward now to finalize the content of the program, to get support for it and to mobilize the financing for it,” Ahmed said.
The country’s finance minister said last week the government expected the Fund’s aid to start flowing from May.
The IMF is insisting that any agreement on financing is backed by Egypt’s government and political partners ahead of presidential elections later this month. This would ensure the deal would outlast the political transition following the polls.
The IMF expects Egypt’s inflation-adjusted economic growth to ease to 1.5 percent this year, which would be the slowest pace since a 0.3 percent expansion in 1992 and down from 1.8 percent in 2011. Its fiscal gap should widen to 10 percent of gross domestic product in 2012, from 9.9 percent last year.
Egypt has said it expects Saudi Arabia to deposit $1 billion at the Egyptian central bank by the end of April as part of a $2.7 billion package to support Egypt’s battered finances.
Egypt’s foreign reserves have tumbled by more than $20 billion to $15 billion during a year of political turmoil following the ouster of Hosni Mubarak.
Ahmed also said the IMF would consider further aid for Yemen after approving a $93.7 million loan for the poorest country in the Arab world in April, which was aimed at addressing an urgent balance of payments deficit.
“It’s hard to say yet [what the financing needs will be]. But clearly the financing requirements for Yemen to embark on the program of expanding employment and the economy will be significantly larger than the current phase of how to stabilize the economy after the crisis,” he said.
Yemeni officials have previously said the public sector would play a key role in job creation as the country attempts to stave off economic collapse after 15 months of political turmoil that saw President Ali Abdullah Saleh forced from office.
“In that context, that they move to the medium-term strategy, the IMF would also consider how to support and accompany them during that process, including by providing financial support over a longer-term period and with amounts that are likely to be larger than the amount we had so far provided for the immediate stabilization,” he said. “The fiscal situation deteriorated significantly, this year, we believe it will stabilize.”