Egypt received yet another visit by the Director of the International Monetary Fund's (IMF) Middle East and Central Asia Department Masood Ahmed this week, though government spokesman Alaa Al-Hadidi said on Monday that the talks had not led to any specific agreement even if they had paved the way for the arrival of an IMF technical team to continue discussions over a projected $4.8 billion loan. In a statement issued at the end of his visit, Ahmed said he welcomed what he called the government's “determination” to move forward with its economic reform programme, which seeks to address the country's economic and financial problems in a socially balanced manner. Just last week Ahmed was quoted as saying that Egypt's economic reform programme did not have the measures needed to address the country's economic problems, and so it seems that if nothing else this week's visit may have shown that the government and the IMF are not at odds. “The IMF is committed to supporting Egypt in this endeavour. We agreed that our discussions would continue diligently over the coming weeks, with the aim of reaching agreement on possible financial support from the IMF,” Ahmed said. However, many questions remain as to how this will be possible. According to the Turkish Anadolu news agency, quoted by Al-Ahram Arabic online, an anonymous source had reported that the IMF official had warned the government that a third of the board of directors of the IMF might not approve Egypt's reform programme and therefore could reject the loan. The source also said that Ahmed had tried to convince the government to accept a $750 million rescue loan from the IMF's Rapid Financing Instrument (RFI), something that the government last week adamantly refused to do. According to Angus Blair of the Signet Institute, a research house providing information on the business environment in the Middle East and North Africa, the government thinks that it is in a strong enough position not to require any immediate aid and that accepting the rescue loan would send out the signal that its handling of the economy has been poor. Blair, however, did not agree that the government had been correct in rejecting the rescue loan out of hand. Hisham Halaldeen, head of business development at Naeem Capital, also said that going for the emergency loan was not necessarily a bad option. Halaldeen said that accepting the emergency loan could give an indication that the government would eventually implement some sort of reform programme in consultation with the IMF at a later stage, which might give some relief to the market. However, he acknowledged that the government may have rejected the emergency loan in order to discuss the full reform package from a position of strength. Yet, the latest version of the government's reform programme seems to be a problem in itself. According to Halaldeen, observers believe that there must be structural reforms before the country can move forward, with differences between the government and the IMF possibly coming from a lack of agreement on the speed and detail of such reforms. Halaldeen said that under a normal scenario, reforms are phased in over a period of years so that the economy can adjust gradually. But “given the difficult fiscal situation the government is facing, reform implementation has to be accelerated,” he said, and it was here that differences between the government and the IMF probably lay. The government may have presented a phased plan, he said, with the IMF thinking that this was too drawn out and in need of acceleration, “There may be the political will to accelerate the reforms, but there may not be enough political strength to carry them through,” Halaldeen commented. The government is not particularly stable, and with elections looming it will be hard to communicate the need for reforms to the public, especially if the adjustments required are large, he said. According to Blair, what the IMF, investors and the private sector are looking for in a reform programme is creativity. The IMF and the international community want to help Egypt succeed economically, “but Egypt's government needs to be in a position to have the right economic plan in place,” Blair said. A creative plan, he added, should improve domestic confidence and stimulate growth, which would then boost government tax revenues. Blair said that such a plan should include fiscal incentives for capital investment, as well as creative ways to boost start-ups across Egypt and increase infrastructure spending, such as on public transport, which would help kick-start economic growth. He said that the delay in implementing the reforms had meant that sentiment among investors, the private sector, and increasingly consumers had remained poor, leading to few hopes for economic recovery. “A loan from the IMF in itself would not help. Any change in sentiment has to come from within Egypt itself.” Blair said that given concerns over the condition of Egypt's economy, almost all aid to Egypt was now likely to come with strings attached, in order “to ensure that there is a solid plan for spending and that the government and the authorities meet the expectations of the people who started the uprising in 2011.” “All aid is from taxpayers, and they increasingly want their aid to be conditional,” he said.
