IMF Says Egypt Has Option of Seeking Emergency Stopgap Funding

Egypt has the option of requesting rapid funding under an emergency International Monetary Fund lending program before reaching a broader loan agreement, an IMF spokeswoman said.

It’s up to Egyptian authorities to decide whether to request support under the fund’s Rapid Financing Instrument, which offers “rapid—but limited—financial assistance to member countries facing an urgent balance of payments need,” Wafa Amr said in response to e-mailed questions. “Egypt needs bold and ambitious policy actions to address its economic and financial challenges without further delay.”

The political bickering and tensions plaguing Egypt’s transition since the 2011 uprising have prolonged its bid to secure a $4.8 billion loan from the fund. The country’s international reserves plunged more than 60 percent from their end-2010 levels. Egyptian officials have said the IMF loan is necessary to boost investor confidence and unlock other funds.

The yield on Egypt’s benchmark dollar bond rose to a nine-month high of 7.27 percent at 5 p.m. in Cairo. It has risen about 170 basis points in the past two months amid sometimes violent unrest on the streets and concern that an IMF loan may be delayed.

The RFI “could be an option if there is a need for interim financing while a strong medium-term policy program is being put in place,” Amr said.

Not Needed

Yesterday, Egypt’s Planning and International Cooperation Minister Ashraf el-Arabi said Egypt is “not in need” of an emergency loan from the fund and is instead focusing on completing the loan agreement with the lender.

“Egypt wants to implement the fiscal and economic reform program as we have a number of structural problems,” he said.

It’s “unlikely that the IMF would leave the Egyptian government high and dry” even if a full program can’t be agreed immediately, William Jackson and Jason Tuvey at Capital Economics in London wrote in a report sent by e-mail today. They cited “speculation” that the Fund may offer an RFI arrangement until after Egypt’s elections, and said the country’s political importance means it can also get funds from allies such as the U.S., Qatar and Turkey.

A court this month ordered a halt to legislative elections which were supposed to start in April.

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