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Friday, October 26, 2012

IMF team will arrive in Egypt for the final stage of the financial aid negotiations

Christine Lagarde, Head of IMF, Egyptian President
Mohamed Morsy and Prime Minister
Hisham Qandeel

The special team of International Monetary Fund (IMF) will arrive in Cairo, Egypt, next week in attempt to resume the negotiations about the $4.8 billion loan requested by Egyptian government for supporting the state’s economy, according to the statement of an official spokesperson of IMF.

Egyptian government has been negotiating the issue of the financial support from IMF during last one and half year. The previous Egypt’s authorities made a request for $3.2 billion, but later the Cabinet of Hisham Qandeel increased the request to $4.8 billion which are reportedly needed for the recovering of Egypt’s economy which suffered a lot since the events of January 25 Revolution in 2011 and during the following transitional period headed by SCAF.

The IMF loan is a very controversial issue for Egypt as the possible financial support of the international organization sparked the wave of criticism within the Egyptian society. Several political forces, such as leftists, for example, speak against the IMF loan and reject it because they are sure this loan will not bring Egypt and its economy any benefits. Several protests have been taking place during the visits of the IMF delegations to express, but the country’s authorities, Egypt’s government and Finance Ministry stress the IMF loan will not harm Egyptian economy but – the opposite – it will help to improve it and to redraw the foreign investments to the country’s economy.

The government formed by Egypt’s President Mohamed Morsy, officially asked for the $4.8. billion loan in August 2012. In September the official IMF delegation headed by Christine Lagarde arrived in Cairo for the initial talks. Christine Lagarde, the Head of IMF, met Egypt’s President Mohamed Morsy, Prime Minister Hisham Qandeel, Finance Minister Momtaz A;-Saeed and other officials representing the state’s authorities and the financial sector. The economical situation in the country, the possibility of the loan and the need of some reforms were discussed during the official visit. The special technical IMF team came to Egypt later to study the issue and to cooperate with Egypt’s government in attempt to give the recommendations and to form the terms of the possible financial aid.

The IMF technical team headed by Andreas Bauer (IMF Egypt’s mission Chief) will arrive in Cairo at the end of October again to discuss the reforms in Egypt’s economic program and to negotiate the terms of the loan. The mission will reportedly arrive on Tuesday, 30 October.

Meanwhile IMF wishes Egypt to make some steps in reforming its economy. One of the most important tasks is to narrow the budget deficit which has grown to 11% of GDP since the Revolution events. Another important issue is to reduce the state fuel subsidies – the measure which is considered to be one of the keys to the IMF deal.

Egypt’s government, in its turn, has been working on the drawing of the new economic reform program which is expected to be finalized and open up for the public discussions soon. The new economy program includes the cut in state’s energy subsidies, expanding of the sales tax into the full-value added tax etc. The program aimed to develop the state’s suffering economy and it might also become the basis for the upcoming IMF negotiations.