São Paulo – The International Monetary Fund (IMF) should loan US$ 4.8 billion to Egypt, said on Thursday evening (6), in Cairo, the Planning and International Cooperation minister of Egypt, Amr Darrag. He explained to the MENA news agency that the loan should be confirmed by the IMF by the end of this month.
To disburse the funds, the IMF requires that Egypt increase taxes on six commodities for the country’s revenues to rise by US$ 2 billion, a proposal to be voted by the country’s Shura council, the Parliament’s Upper House. Another condition is that Egypt should reduce the budget deficit. This demand should be complied with in the next fiscal year, 2013/2014, to begin on July 1st. The target is for the budget deficit in the period to be 9.5% of Gross Domestic Product (GDP). In the 2012/2013 fiscal year, the deficit reached 11.5% of GDP.
Economic reform of Egypt also forecasts introduction, in August, of a “smart-card” through which consumers may buy a limited volume of subsidised fuel. This measure will be adopted to reduce government spending with fuel subsidies, which weighs heavily on accounts. With the measure, the forecast is for the government to economize US$ 4.28 billion in the fiscal year.
Negotiations for Egypt to obtain an IMF loan began last year. In November, an agreement was announced, but the country decided against it due to the country’s population protesting against the conditions imposed by the IMF to the government of president Mohamem Morsi. At the occasion, protesters stated that the demands made by the IMF would increase unemployment.
Talks returned and, in April, came to another halt without an agreement having been reached. At the occasion, the IMF stated that Egyptian authorities should deal with fiscal and payment deficits in a “socially balanced way”. In May, new talks started.
Egypt plans to use the IMF funds to help the country recompose its international reserves and control depreciation of the Egyptian pound against the dollar. The country’s economic conditions have deteriorated since it lived the protests that resulted in the ousting of dictator Hosni Mubarak, in February 2011. Morsi was elected in June last year, and inaugurated in July. Some Arab countries, like Qatar and Libya, have already loaned funds to help Egypt overcome its financial hardships.
*Translated by Mark Ament
