The International Monetary Fund expects that “if everything moves forward,” talks with Egypt over a $3.2 billion loan should conclude “in the next couple of months,” the fund’s regional director said.
“This visit was never intended to conclude an agreement,” Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said in a phone interview during a trip to the North African country. The fund’s technical team “will work with the authorities on the contents of the program. We will then also work with them to identify that the program has broad support.”
Egypt officially requested the loan from the fund in January, as the government seeks to boost an economy struggling to recover from a year of unrest in the wake of the uprising that ousted Hosni Mubarak. The economy grew 1.8 percent in the fiscal year through June, the slowest pace in at least a decade. The Washington-based lender wants the Arab country to submit an economic program that has popular support.
Such support “is needed to ensure implementation in a transitional period, beyond the transition,” said Ahmed. “We will be working with them over the next few weeks to help them mobilize financing for the program.”
After meeting the IMF mission today, the Muslim Brotherhood’s Freedom & Justice Party, which makes up the largest bloc in the parliament, said it still doesn’t have enough information about how Egypt will use and repay the requested loan.
The Egyptian government “hasn’t yet provided the economic measures plan linked to the loan,” party chairman Mohamed Morsi said, according to an e-mailed statement. The government “didn’t exert the required effort to find alternatives that do not add to the public debt burden,” it cited him as saying.
The comments by the group “definitely point to the lack of political consensus,” Said Hirsh, a Middle East economist at Capital Economics in London, said by phone. “There are definitely several obstacles to overcome in relation to the IMF program.”
Ahmed said the feedback from Freedom and Justice party officials “was that they’re open to the idea of working with the IMF and the World Bank. They see these as credible institutions.” The party “also said that at this stage they want to get some more information on the details of the policies behind the program that the government has put forward to the parliament,” he said.
“We have said from the very beginning that it’s better to take one’s time and make sure that there’s a program that has a broad support,” said Ahmed. “We think it’s a good idea that there’s a discussion and a broad debate about the measures before they are finalized.”
Egypt’s net international reserves have fallen for 14 straight months since last year’s uprising, to $15.7 billion in February.
“While reserve decline has slowed in February this year, that should not be any cause for complacency - reserve decline slowed previously as well, only to pick up pace sharply,” Raza Agha, London-based senior economist at Royal Bank of Scotland Group Plc., said in response to e-mailed questions. “Hence, the pressure remains to come to an IMF agreement sooner rather than later, so that inflows from other donors can also start flowing.”
Ahmed said the deterioration in reserves “demonstrates the need to act on a program that will both stabilize and then increase and build these reserves.”
The IMF mission will meet tomorrow with members of parliament, he said.
“I think that will be a very good opportunity to hear their views and to explain and answer any questions they have about the IMF,” he said.