YESTERDAY should have been the day on which the board of the International Monetary Fund (IMF) finally decided on Egypt's request for a $4.8 billion. But only a week earlier, following the controversy over President Mohamed Morsi's 22 November constitutional declaration, which broadened his powers and shielded his decisions from judicial review, the Egyptian government requested a one-month delay. This is not the first time the loan has been put on the back burner. The loan was about to go through in the summer of 2011, but Egypt's military rulers at the time turned down a $3.2 billion loan for fear of indebting future generations. The loan request was later increased to $4.8 billion and a staff-level agreement was reached on 20 November. The government attributed the recent need for the delay to domestic political circumstances. It feared that the unrest that accompanied President Morsi's decree and the call for a referendum on the constitution could have negatively affected the board's decision. Moreover, the delay request followed a government decision to postpone implementation of planned taxes increases on a wide range of items. Although the government had denied that the tax increases were correlated to the IMF loan, observers have said that the taxes were a part of unwritten pledges by the government to the IMF. The Egyptian government is seeking the IMF loan to shore up its budget deficit, which reached 11 per cent of GDP in 2011/12. While opposition was strong to the IMF loan for fear of IMF conditionality, the government repeatedly assured that the IMF is not imposing conditions but letting the Egyptian government implement its own reform plan. For the government, the signing of the loan would have been a seal of approval of its economic policies and an indicator to investors and donors that the Egyptian economy is on the right track. The loan would open the way for more assistance from bilateral and multilateral donors waiting for the IMF to sign off first. Some $10 billion in financial assistance has been promised by international and regional donors. To the government the loan would also be a source of cheap funding. At around 1.5 per cent interest rate, the loan is cheaper than the funds the government is borrowing domestically in the form of treasury bills and bonds at rates that at one point reached 16 per cent before the presidential elections. That interest rate started to decline following the presidential elections but began climbing up again after the president's controversial decree.
