Once parliamentary elections are out of the way, Egypt stands a chance of securing an International Monetary Fund loan to help address its currency and budget crisis; the problem is that no one knows when that will be. With face-to-face contact between Egypt and the IMF re-established this week after a two-month gap, both sides are pushing for urgent action, but with strikingly different emphases. President Mohamed Mursi’s government wants a full $4.8bn loan, as agreed in principle last November, but based on a gentler reform programme than originally planned, “in light of preserving growth rates, employment and protecting the poor”. By contrast, the IMF’s top official for the region, Masood Ahmed, spoke only of “possible financial support” after he met the government and central bank in Cairo on Sunday.
Also, the IMF has vigorous reform in mind to tackle problems such as energy subsidies, which are draining huge sums from the state budget. “Egypt needs bold and ambitious policy actions to address its economic and financial challenges without further delay,” spokeswoman Wafr Amr said last week.
Such “policy actions”, most likely tax rises and subsidy cuts that will send fuel costs soaring, would not go down well at any time with a population suffering from a steady economic slide since the 2011 revolution, let alone before an election.
“The IMF will want to see measures to rein in the budget deficit in order to agree to a package which the government may be loath to implement prior to elections. An imminent agreement seems unlikely,” said Giyas Gokkent, Chief Economist at National Bank of Abu Dhabi.
Cairo already had to request a delay in the IMF loan in December during serious street violence, and trouble has regularly erupted since then over a variety of grievances.
In such a volatile atmosphere, matters would be helped if everyone knew when a new lower house of parliament would be installed. Mursi announced last month that the elections would start on April 22, only for a court to cancel his decree on a procedural technicality.
Full Article: Election limbo keeps Egypt’s IMF loan on ice.
