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Egypt may seek increased $4.8-billion IMF loan

Egypt's President Mohamed Morsi speaks at the Al-Azhar Conference Centre in Cairo on August 12, 2012.

H/O/REUTERS

Egypt will discuss the possibility of a bigger-than-expected $4.8-billion (U.S.) loan from the International Monetary Fund this month, when head Christine Lagarde will lead a delegation to Cairo, its finance minister said.

Ms. Lagarde's presence was requested by Egypt but could signal a fresh determination on both sides to seal a long-awaited accord after new Egyptian President Mohamed Morsi appointed his first government last month.

The IMF confirmed in a statement that Ms. Lagarde would be present and said the delegation's visit would start on Aug. 22.

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"Her visit is a reflection of the IMF's continuous commitment to support Egypt and its people during this historic period of transition," it said.

During 18 months of political turmoil since the overthrow of autocratic leader Hosni Mubarak, successive Egyptian governments negotiated with the IMF to secure emergency funding that various officials had put at $3.2-billion.

No deal has been reached and Egypt's fiscal and balance of payment problems have worsened. An exodus of foreign investors in the wake of the turmoil left local banks shouldering almost all short-term lending to the state, sending its borrowing costs to unsustainable highs.

"We will discuss, in the negotiations we are to carry out with the IMF, increasing the loan to $4.8-billion," finance minister Mumtaz al-Saeed told reporters in Cairo, adding that he asked the U.S. on Tuesday for a $500-million grant to support the state budget.

An IMF deal would also help Egypt add credibility to economic reforms needed to restore investor confidence.

Egypt's 2012-13 budget sees a 12.5 per cent rise in the deficit.

The deficit would represent 7.9 per cent of gross domestic product (GDP), down from 8.2 per cent a year earlier, although most economists forecast lower GDP growth than the government's estimate of 4 to 4.5 per cent.

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Tax receipts have suffered from a weak economy and the previous government boosted spending to meet popular demands for better living standards after Mubarak's overthrow.

Aid promised by foreign donors last year was largely absent until June, when funds arrived from Saudi Arabia.

Saudi transferred $1.5-billion as direct budget support, approved $430-million in project aid and said it would allow Cairo to use a $750-million credit line to import oil products.

Mr. Saeed said this week that Qatar should place the first $500-million tranche of a $2-billion deposit in the central bank within a week.

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