CAIRO - The prime minister told Egyptians on Sunday that the economic situation was worse than anyone imagined and that there was a need for austerity to rein in the burgeoning budget deficit. Kamal al-Ganzouri, 78, also said in a news conference live on state television that re-establishing security would be a priority for the "national salvation government" that he unveiled last week. "The economic situation is worse than anyone imagines," he said, describing what he said were policy failings during the last decade of ousted President Hosni Mubarak's rule. Ganzouri said the government would not agree to a $3.2 billion facility from the International Monetary Fund (IMF) until the outlook for the budget was clearer. "If we are forced to resort to the IMF, we will resort to it. This is a matter open for discussion," he said, echoing comments by a general from the ruling army council who had said Egypt would only go to the IMF in "extreme need". Egypt negotiated the facility with the IMF this year but turned it down in the summer and has since sent mixed signals over whether it will take it. "To save 20 billion (Egyptian pounds) there has to be austerity, but in sectors that we feel do not affect the Egyptian citizen. I want to reduce this (budget deficit), because the deficit remaining as it is means there will be inflation," he said. Soaring prices were among the political and economic factors that drove people on to the streets to oust Mubarak, and have ticked up again. Urban consumer inflation rose to an annual 9.1 percent in November, from 7.1 per cent in October. Politicians and activists criticised Ganzouri's appointment because he was premier in the 1990s under Mubarak, although many ordinary Egyptians see him as a man who stabilised the economy at the time and who was untainted by corruption. The government has forecast Egypt's deficit will be 8.6 per cent of gross domestic product in the year ending June 2012, although economists expect it to be much bigger and an army official has suggested it could climb to about 11 per cent. "We must create new revenue and reduce the burden on citizens," Ganzouri said, adding that debt servicing accounted for a quarter of the annual budget. "We can advance if we co-operate and speak of the real priorities: economy and security." Economists say Egypt is fast heading to a currency crisis if it does not swiftly stabilise an economy battered by the uprising that ousted Mubarak and subsequent political turmoil, which prompted investors and tourists to flee. Foreign currency reserves plunged to about $20 billion in November from $36 billion at the end of 2010.
