IMF team in Egypt for loan talks
An IMF team arrived in Egypt yesterday for talks with the government aimed at agreeing to a possible US$4.8 billion (Dh17.63bn) loan the country needs to help stave off fiscal meltdown.
Egypt needs the cash to bring other investors to the table and plug a budget deficit running at 11 per cent of GDP.
IMF officials will assess the progress of the prime minister Hisham Kandil in drawing up a reform plan to trim the budget, as required by the GCC. Talks were expected to last about two weeks, the IMF said yesterday.
But it is still not certain when a deal can be struck.
Officials on both sides have voiced hope of a deal before the end of the year but Mr Kandil has been under pressure by some within the Freedom and Justice Party to delay until after parliamentary elections.
"There seems to be some momentum that some sort of agreement will be made but there are a lot of moving parts," said Julian Bruce,the head of institution trading at EFG Hermes in Dubai.
Mr Bruce said that expectations of a positive deal had been priced by investors into Egypt's stock market.
The nation's benchmark EGX30 index rallied on Monday, but fell 2.1 per cent yesterday after an Egyptian administrative court ruled that the mining company's Centamin contract to exploit the Sukari gold mine in the country's south-eastern desert.
Egypt's fiscal situation has deteriorated as the government has wavered over whether to press ahead with taking a loan. Last year it reached an agreement with the IMF on a reform programme, only to later decide against it.
But the talks were revived after the election of Mohammed Morsi as president in June.
Cutting energy subsidies is believed to be the most pressing priority highlighted by the IMF, which has estimated that the government should be able to reduce the budget deficit to 10 per cent of GDP in the financial year ending next June.
A loan deal should also help to cut the levels of interest rates charged by Egypt's local banks, fuelled by growing demand from the government to fund its deficit.
Published: October 31, 2012 04:00 AM