A year on from the spring 2011 International Monetary Fund and World Bank meetings, a $3.2 billion loan to Egypt remains illusive, Niveen Wahish reports The International Monetary Fund (IMF) this week reiterated its interest in helping Egypt, but stressed that broad support continues to be a basic requirement. During its spring meetings which ended earlier this week, IMF officials stated that negotiations with Egypt over a $3.2 billion loan remain in progress. "We have identified the needs. We are reaching out to all the appropriate authorities in the country, and we want political endorsement," said IMF Managing Director Christine Lagarde. Meanwhile Ayman Al-Kaffas, World Bank alternate executive director and representative of Egypt, told journalists that negotiations over Egypt's loan are "almost finalised and should be announced during the coming few weeks." Lagarde stressed that the IMF stands ready to help but in accordance with its rules. Those rules, Lagarde said, include "negotiating an economic programme with the authorities that is going to actually help the country pull itself out of the difficulty it is in, often a balance of payments difficulty, which might arise in Egypt soon." Another important condition, Lagarde added, is broad political support in the country. "If we hear solid partners on the ground say they are not too sure about the programme, not too sure about the IMF, not too sure about borrowing, then that is a bit of an issue," she said. In fact, it appears that that may be the main obstacle to Egypt acquiring the loan. Mohamed Gouda, spokesperson and member of the economic committee of the Freedom and Justice Party (FJP) that holds a parliamentary majority, told Al-Ahram Weekly that the party has not changed its stance towards the IMF loan since March when it met with IMF officials in Cairo. The FJP is neither for nor against the loan and they have no objection to cooperate with the IMF, he said, but they believe the government has not exhausted its domestic financing options before reverting to external borrowing. But the government says otherwise. Egyptian Minister of Finance Momtaz El-Said said in mid-April that the government is coordinating with the FJP regarding the IMF loan, and that a letter of intent would soon be signed with the IMF. Meanwhile, Gouda said his party had not received any details on an eight-page general economic reform programme they were shown in March. As things stand, "we still have our reservations," he said. To Gouda, the drop in the country's foreign reserves was mainly attributed to a fall in tourism and foreign direct investments. Other resources of hard currency such as exports, Suez Canal revenues and remittances have all increased. And the drop in tourism is mainly a result of insecurity. "Once security is back, foreign currency will increase," he said. Meanwhile, the IMF loan "will only last 45 days". Gouda further explained that any loan is bound to be accompanied by conditions. "How can we approve a loan when we have not been told what the conditions are?" he asked. Further, how can the current government approve a loan that will only be implemented by its successor, after presidential elections have taken place. "This government is incompetent and unable to bear the responsibility; it wants to take the easy way out by borrowing," said Gouda. Before seeking the loan, the FJP believes the government must first restructure energy subsidies to charge a higher, energy-intensive rate, collect tax arrears, and solve the issue of private funds, said to hold around LE36 billion. In reality, the government has started working on these issues. It offered incentives to encourage the payment of tax arrears. Egypt's finance minister also announced that money in private funds affiliated to the government and government authorities would become part of the budget. As for subsidies, the government has announced that it has increased the price of fuel for energy-intensive industries. And in spite of the FJP's uncertainties, Gouda resisted getting any more involved in negotiations regarding the potential loan. "We have been asked to join the negotiations with the IMF, but that is not the role of the parliament," he said. "The government will negotiate, sign the letter of intent and parliament will examine the agreement when it is presented to us for approval." Meanwhile, Lagarde said the IMF would never leave the negotiation table before the issues at stake were solved. "We will keep at it. We are as focussed on helping Egypt and other Arab Spring countries as we are in helping other countries," she said. Along similar lines, the G24 countries' communiqué said: "We reiterate the importance of the IMF and the World Bank to adequately respond to the developmental needs of Middle East and North Africa (MENA) countries in transition, and call for a scaling up of resources, policy advice and technical assistance essential for addressing the region's enormous economic and development challenges, including high and persistent unemployment." Lagarde stressed that while she hoped the IMF would be able to provide Arab countries in transition assistance, the loan Egypt is requesting "will not be sufficient", which means it will require other donors to help Egypt. In fact, one of the criteria the IMF said it needs to approve Egypt's loan is to make sure that other donors are on board to cover the $11 billion cost of Egypt's economic reform programme. Already the Egyptian government has begun working on that. This week it announced that promises of assistance by Saudi Arabia have begun to materialise, with $2.75 billion on the way. The IMF had estimated that Egypt's economy would grow at 1.5 per cent this year, down from 1.8 per cent last year. However, it foresees a 3.3 per cent growth rate for next year.
