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Egypt likely to secure $10 bn from the IMF

Egypt likely to secure $10 bn from the IMF

Egypt

The Egyptian central bank has said it could secure up to $10 billion from the International Monetary Fund (IMF) by agreeing to a structural reform programme.

Talks over a possible $5 billion loan have failed in the past and analysts say an IMF deal might require reforms that the government could find politically difficult to implement.

“Egypt will have to proceed with some painful reforms to guarantee that the loan will work this time. The reform process in Egypt is moving slower than would be accepted by the fund” Hany Farahat, an economist at CI Captial told Reuters.

The cenrtal bank’s announcement of a possibly securing $10 billion from the IMF followed an earlier comment by a cabinet minister on Monday that Egypt had last week started negotiations with the IMF for a $5 billion loan.

“There is a delegation from the IMF that might visit Egypt next month to continue the negotiations” the cabinet minister told Reuters on Monday.

A statement from the Egyptian central bank indicated that while the bank which is said to be in talks with the international lender had not formally made a request to negotiate a structural reform programme, it was in constant contact with the IMF and could secure $10 billion should it opt to apply.

The IMF’s mission chief for Egypt, Chris Jarvis is quoted by the Reuters news agency as saying “the size of any financial arrangement would depend on Egypt’s financing needs and on the strength of its economic programme”.

Egypt’s economy has been struggling since the 2011 uprising which ushered in political instability and drove away tourists and foreign investors.

The country’s reserves have since halved to about $17.5 billion.

The central bank statement said Egypt was still pursuing its existing reform programme which includes plans for Valued Added Tax (VAT) and subsidy cuts.

The VAT bill is in its final stages but could face resistance in parliament following concerns over inflation that has hit seven-year highs since the Egyptian pound was devalued by 13 percent in March.