Bankers Differ On Impact Of Political Turmoil Over IMF Talks
Egypt is witnessing political turmoil after the eruption of violent clashes between protestors and security forces in Mohamed Mahmoud Street. Many political powers protested yesterday against the constitutional declaration issued by the Egyptian President Mohamed Morsi. Amwal Al Ghad asked a number of bankers on the effects of these events on the negotiations currently being conducted by Egypt and the International Monetary Fund (IMF) over US$ 4.8 billion loan.
The Minister of Finance Momtaz El-Saeed announced last week that Egypt reached an initial agreement over the loan with IMF mission, at a time when the budget deficit rose by 3.9% to reach EGP 69.6 billion at the end of Q1 of FY 2012/2013.
Some bankers see the current events as temporary and will not affect the negotiations with IMF, expecting Egypt’s credit rating to improve after electing a new parliament and issuing the new constitution. Some others believe that the current political unrest will hinder the negotiations, claiming that even if IMF approved lending the country, the conditions and interest rate of the loan will be affected by the current events as Egypt’s credit rating is expected to drop in the upcoming period.
El-Sayed El-Kosayer, chairman of the Industrial Development and Workers Bank of Egypt, said the current political unrest will post a temporary effect on the country, affirming that the negotiations with IMF will not fail because of these events. He called on the Cabinet to reduce the budget deficit through restructuring subsidies and rationing expenditures.
El-Kosayer expected Egypt’s credit rating to improve after being lowered more than three successive times after the issuance of the new constitution and the election of the People’s Assembly (Lower Parliament House).
Bassant Fahmy, banking expert and former consultant to Al Baraka Bank, said the current unstable political scene may represent an obstacle hindering negotiations with IMF which will probably place tougher conditions on the country as she expects Egypt’s credit rating to be lowered in the upcoming period.
“Despite the negative repercussions of yesterday’s protests, the opposition political powers have been united for the first time since last year’s revolution. The unity of opposition sends a message to international bodies that the country’s political maturity has grown,” she continued.
Fahmy called on the government to take a number of necessary procedures such as including government’s funds in the budget, restructuring subsidies and fast collection of taxes. She affirmed that if the current government fails, a new government shall be formed.
