São Paulo – This Tuesday (11th), the International Monetary Fund (IMF) announced that it will postpone the loan it had agreed upon with Egypt last November. According to an IMF press statement, the US$ 4.8 billion loan has been suspended by request of the Egyptian authorities due to the ongoing protests against the measures announced by president Mohamed Morsi.
“In light of the unfolding developments on the ground, the Egyptian authorities have asked to postpone their request for a Stand-By Arrangement with the IMF. The Fund remains in close contact with the authorities, and stands ready to continue supporting Egypt during the ongoing transition and to consult with the authorities on the resumption of discussions regarding the Stand-By Arrangement,” according to the IMF statement.
The loan was agreed on in November following months of negotiations. It started with an offer from the IMF to Egypt while the country was still being ruled by a provisional government, prior to Morsi’s election, in June, and proceeded after the president was inaugurated. Morsi even met with the IMF managing director Christine Lagarde in August, during a visit of hers to the country.
The agreement announced on November 20th provided that the US$ 4.8 billion were to help reduce Egypt’s budget deficit, replenish its foreign exchange reserves, and minimize debt. Meanwhile, the Egyptian government committed to promoting structural reforms in order to boost economic growth.
During the 22 months in which the deal was to remain effective, Egypt would be allowed to draw the funds while implementing economic reforms. The government was to gradually increase the tax income and the tax on sales of goods. That would help the country lower its budget deficit and public debt, so it could generate income and make improvements in its economy.
Said improvements included attracting capital, fostering trade, increasing the competitiveness of Egyptian products, raising foreign exchange reserves, and fighting inflation. These measures would keep the economy solid so it could withstand international crises.
The demonstrations currently taking place on Egyptian streets were triggered by a decree granting the president increased powers, which Morsi signed on November 22nd. Ever since, opponents and supporters of the president have taken the streets to champion their views. Last Monday (10th), Morsi granted police powers to the Army in order to ensure that order is kept. Next Saturday (15th), a referendum should take place to pass a new constitution.
*Translated by Gabriel Pomerancblum
