Egypt and a visiting International Monetary Fund mission agreed to a $3 billion loan as the North African country seeks to fund its widening budget deficit after a popular revolt earlier this year.
The 12-month loan is part of wider international support pledges for Egypt, where the turmoil that accompanied the uprising that led to the ouster of President Hosni Mubarak has hurt revenue from tourism and industrial output.
“Following a revolution and during a challenging period of political transition, the Egyptian authorities have put in place a home-grown economic program with the overarching objective of social justice,” Ratna Sahay, deputy director of the Middle East and Central Asia Department at the IMF and head of an IMF mission now in the country, said today in an e-mailed statement.
Egypt’s budget deficit may reach 11 percent of gross domestic product in the fiscal year that ends in June 2012, compared with an expected 8.6 percent in the current one, Finance Minister Samir Radwan said on June 1. The economy is expected to grow 2.6 percent this fiscal year, accelerating to 3.2 percent the following year, he said.
“The fact that we’re being offered international funding is a positive sign and should decrease the widening of the fiscal deficit,” Mona Mansour, the co-head of research at CI Capital, a Cairo-based investment bank, said in a phone interview. “It shows that they have trust in the Egyptian economy and in that it will recover.”
U.S. President Barack Obama in May promised Egypt $1 billion in loan guarantees through the Overseas Private Investment Corporation and the cancellation of $1 billion in debt, about a third of what it owes the U.S.
French President Nicolas Sarkozy has said Group of Eight countries will provide $10 billion in direct aid to Egypt and Tunisia, the other Arab country where a popular uprising unseated the president, and that oil exporting countries in the Gulf such as Kuwait, Qatar and Saudi Arabia will kick in another $10 billion. Institutions such as the World Bank and the African Development Bank could provide more than $20 billion for Egypt and Tunisia through 2013, a May 27 statement said.
Mubarak resigned on Feb. 11 after three decades in power, ceding interim authority to a military council which dissolved parliament and promised parliamentary and presidential elections later this year. The revolts inspired protests across the region, including in Yemen, Syria, Bahrain and Libya.
Radwan is slated to hold a press conference later today in Cairo.