The International Monetary Fund (IMF) is strongly committed to working with the new Egyptian authorities to support the Arab world’s most populous nation in its “difficult transition” and is ready to send a mission to Cairo should the authorities wish it, said Christine Lagarde, the fund’s managing director.
Lagarde’s remarks, carried by the Jordanian paper Al-Ghad, came after Egypt reduced its representation to the fund’s annual meetings to diplomatic staff in protest of what several Egyptian officials said was the fund’s reluctance to recognise the new government.
Two years of negotiations over a $4.8 billion loan have passed without an agreement between the two sides, mainly because of successive Egyptian governments’ reluctance to impose reforms needed to fix the economy but that would squeeze an already economically strained population, such as lifting fuel subsidies and raising taxes.
“We are strongly committed to supporting the people of Egypt during this difficult transition…We have worked intensively with successive Egyptian governments since the January 2011 Revolution and we are committed to working with the current authorities,” Lagarde told the paper in the strongest comments recognising the new government.
“The IMF staff is ready to work with the authorities here or anywhere else. I am ready to send a team to Cairo as soon as the authorities wish to advance our common understanding of the current economic situation,” said Lagarde, adding that the fund was ready to discuss economic measures that would generate urgently needed improvements in the lives of Egyptians.
Political change in Egypt has also taken its toll on the talks. Since the 3 July ouster of president Mohamed Morsi and his government, the fund has not resumed its talks with Egyptian officials saying it was still determining how it would approach the newly-installed government.
In response, officials such as Prime Minister Hazem El-Beblawi, his deputy Ziad Bahaaeddin and Minister of Industry and Foreign Trade Mounir Fakhry Abdel-Nour have all said Egypt was in no rush to sign an IMF agreement, thanks to available resources from GCC countries that would enable it to implement its economic programme.
In an interview with Egyptian channel CBC on Friday, El-Beblawi said the fund had held talks over recognising the current government, which he denounced saying that Egypt was one of the founding member countries of the fund.
Since 3 July, Egypt has turned increasingly to friendly Arab states for economic assistance, receiving pledges of $12 billion in loans, grants and fuel shipments from Saudi Arabia, the United Arab Emirates and Kuwait, of which $7 billion have been delivered.
Turning to friendly Arab states and away from the IMF will temporarily relieve Egypt from imposing austerity measures that could trigger public unrest. Egypt’s fuel subsidies alone take up 20 percent of state expenditure while the budget deficit has reached 14 percent in the year 2012/2013. Finance Minister Ahmed Galal had said in September the government aims to reduce the deficit to 9.1 of GDP.
Financing from several GCC countries is alleviating these constraints and, as a result, the authorities have announced a $3.2 billion fiscal stimulus package aimed at supporting growth and creating jobs.
In its newly-released World Economic Outlook, the IMF showed that Egypt’s real GDP has declined from 2.2 percent in 2012 to 1.8 percent in 2013, while for 2014 it projected growth of 2.8 percent. It also set the unemployment rate for 2013 at 13 percent and projected it to fall to 12.8 percent in 2014.
Meanwhile, Egypt’s foreign reserves, which were boosted by the GCC funds, saw a minor decline of $200 million in September reaching 18.7 billion down from $18.9 a month earlier according to the Central Bank.
Source: Ahram Online