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Thursday, August 23, 2012

Christine Lagarde visited Egypt for IMF loan talks

Christine Lagarde, Managing Director of IMF, and Mohamed
Morsy, Egypt's President

Christine Lagarde, Managing Director of IMF (International Monetary Fund) visited Egypt this Wednesday, on 22 August 2012. She concluded her one-day visit to Cairo after meeting with Egypt’s President Mohamed Morsy, Prime Minister Hisham Qandeel, Finance Minister Momtaz Al-Sayyed and with other representatives of the government’s economic team.

Christine Lagarde was expected to start the negotiations with Egyptian government over the IMF loan which is needed for the restoring of the country’s economy, but the current visit was short, and the talks were suspended till the next month. The special technical IMF team will visit Egypt in September to study Egypt’s government’s economic program.

IMF and Egypt had the talks regarding the financial loan from the international financial body since June 2011. Egypt requested $ 3.2 billion loan, but now that amount was raised due to the economic difficulties. The pressure on the local currency increased and the key sectors of Egyptian economy still face a very slow recovery (for example tourism sector). So, during today’s meeting with Christine Lagarde Egyptian authorities asked IMF for $ 4.8 billion loan for restoring Egyptian economy, and there were the hopes to begin the negotiations over the loan issue, but they are expected to start after the cooperation with IMF technical team and studying the issue together.

Christine Lagarde also made a statement on the official website of IMF saying that Egypt asked to support the country’s economic program financially, and IMF responded quickly to this request. The technical team, which is expected to visit the most populous Arabic country in September, will observe the economic situation and study the issue. It will work together with Egyptian authorities and discuss the ways and forms of the cooperation and the possible financial support.

Christine Lagarde
During this short visit the head of IMF also acknowledged the difficulties in Egypt’s economic situation. Egyptian economy faces currently the serious challenges, such as need of restarting the economy growth, reducing budget and balance-of-payments deficits, and it suffers from the lack of funding. Egyptian people expect better life conditions, and it is very important to get the country’s economy back on track, although it will be not so easy task on the current stage.
The IMF loan should support Egyptian economy and help to get back the foreign investors, as a lot of them left Egypt after 18-days uprising in 2011 and the following developments. The observers and economists state international loan could help to resolve this problem.

According to the statement of Egypt’s Finance Minister Momtaz Al-Sayeed the IMF loan would be granted to Egypt under the terms of the agreement that Egypt has been negotiating since June 2011.

Mohamed Morsy’s administration will present to Christine Lagarde and IMG team the new economic program, which will focus more on the social justice. But generally the new program will be similar to the previous one, but will include some changes and suggestions from the IMF technical team, according to the information presented by Momtaz Al-Sayeed.

Mohamed Morsy
The IMF program of financial support focuses on stabilizing of the economy and modernizing of the country’s fiscal policy. The budget and the balance-of-payments deficits should be also reduced (for example, in case of extensive fuel subsidies etc.), and the tax system should become more stable.

According to the project Egypt’s state’s budget deficit is expected to be nearly 8% of the national GDP. The situation with the local economy remains tense with the growing pressure on the national currency, EGP, and due to lack of foreign financial inflows. The help of some international funds could help to stabilize and improve the Egyptian economy, according to many observers.
Momtaz Al-Sayeed, Egypt's Finance Minister

Meanwhile dozens of demonstrators, mainly leftists and revolutionaries, protested today during the visit of Christine Lagarde in front of the Cabinet and demanded the rejection of the IMF loan. They were holding the banners and chanted against the IMF loan which they see as a representation of capitalism and against the capitalism in general. The protesters claim those loans and financial help of the international funds will not help to restore the Egyptian economy, but rather will only deteriorate the situation in the country, and the life of the average citizens will only worsen. The loans of IMF and World Bank are generally seen by Egyptian leftists as spreading of capitalism in the world.

It’s also worth mentioning, that the Islamist forces who have been spoken against the IMF loan before, were not present at the demonstration.