Egypt is set to receive $190 million in budget support from the US, the first instalment of a $450 million grant that the US had promised the country to be used for balance of payments support. The money had been blocked in the US Congress, where some members had called for a re-evaluation of Egypt-US relations following attacks on the US embassy in September 2012 in protest against a blasphemous anti-Islam movie made in the United States. This sum was a “downpayment on Egypt's promising future,” said US Ambassador to Egypt Anne Patterson at the signing ceremony, according to a press statement. “And as your country continues to make progress with the International Monetary Fund [IMF] on a solid programme to stabilise and grow your economy, we will continue to be there, as friends, to support your efforts with additional assistance.” The release of the $190 million came following US Secretary of State John Kerry's visit to Cairo earlier this month. Kerry said that more of the $450 million would be released once Egypt had signed a projected $4.8 billion loan agreement with the IMF. But an agreement with the IMF is not likely to happen soon. This week the London Financial Timesquoted Masood Ahmed, director of the Middle East and Central Asia department at the IMF, as saying that Egypt's proposed economic reform programme “has to have the desired impact on confidence… [and] it needs to have strong measures to address Egypt's broader economic problems.” The government sent its reform programme for review to the IMF earlier this month. Once the IMF has approved the programme, it will send a team to negotiate further details with the Egyptian government. This is the third reform programme the government has sent to the IMF in the last two years. On the two previous occasions, the government completed the process and was about to get approval for the loan request but then retreated at the last minute. The latest such incident was at the end of November 2012, when the government failed to apply a tax hike on a wide range of products. In the meantime, Egypt's minister of finance, Al-Morsi Higazy said on Tuesday that the government will not revert to the IMF's Rapid Financing Instrument (RFI) for a $750 million rescue loan. The minister said that Egypt is Focused on negotiations for the larger IMF loan. Earlier in the week, the minister of planning and international cooperation, Ashraf Al-Arabi, had said that “The cure for the budget deficit needs broad structural measures, and the help we are requesting from the IMF is not a quick fix.” RFI is designed to provide rapid, but limited, assistance to member countries facing urgent balance of payments needs. IMF spokeswoman Wafa Amr told Reuters that “Use of the RFI could be an option if there is a need for interim financing while a strong medium-term policy programme is being put in place”. Experts believe that reverting to the RFI would harm Egypt's reputation on the international markets. Furthermore, the small sum Egypt would get from the RFI would do little to bridge the gaping budget deficit and meet the country's thirst for hard currency. Egypt is targeting a budget deficit of 10.9 per cent in fiscal year 2012/13 provided that reforms are implemented. Without reforms, the deficit could reach around 12 per cent. At the end of February, Egypt's hard currency reserves stood at some $13.5 billion, down from $36 billion two years ago. According to an informed source at the IMF, help from the Fund will take time even if it approves the government's reform programme. The process of completing the negotiations could take no fewer than three months, he said. In the meantime, other sources of foreign assistance have helped prop up the reserves over the past year, but no further support appears to be forthcoming in the near future. Reuters reported Qatari Finance Minister Youssef Kamal as saying on Monday that Qatar did not expect to give further financial aid to Egypt in the immediate future. Qatar has thus far given Egypt $1 billion in grants and $4 billion in the form of a deposit with the Central Bank of Egypt.
