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IMF team in Egypt for talks about securing $3.2 billion loan to boost troubled economy
CAIRO (AP) ' An International Monetary Fund team on Monday discussed a $3.2 billion loan to shore up Egypt's economy, battered by the effects of political unrest that followed the ousting of President Hosni Mubarak a year ago.
Egypt's leaders decided the nation needs the loan to prevent a further decline, but the country's largest political movement, the Muslim Brotherhood, said the government must come up with a clear economic program before it could support taking the huge loan.
The Brotherhood, which controls nearly half of seats in parliament, said in a statement that the loan could help ease some of the country's financial strains, but the military-appointed interim government does not have a clear plan for how it would used the money and then repay the loan.
The Brotherhood issued the statement after its leaders met with the IMF team.
"The program that the government has offered concerning this loan is general and vague," the statement said, warning that it feared that the loan would "increase public and economic burdens."
The loan is seen as a necessary cash infusion to allay investor concerns.
The yearlong political uncertainty and unrest has decimated tourism and driven investors away, and a persistent wave of strikes and protests have badly hit productivity. The government has used foreign currency reserves to protect the local currency from collapse.
Egypt's net international reserves were down 50 percent year-on-year by the end of December, leaving serious questions about how the country can raise new funds to cover a widening deficit, with accompanying worries over the balance of payments.
In a related economic development, the Finance Ministry said it would secure $1.1 billion in aid from the European Union and the World Bank. An EU financial official in Cairo has said that the EU portion of the aid package hinged on Egypt's success in obtaining the IMF loan.
According to Mustafa Abdel-Aziz, a senior broker with Mideast investment bank Beltone Financial's brokerage division, the loan might help reverse a negative trend in foreign direct investment in Egypt and generate some foreign liquidity in the system.
Egypt has also looked into aid packages from the United States and oil-rich Gulf Arab countries, but many are waiting until the IMF loan goes through.
Egypt formally requested the loan in January after rejecting a loan offer made last year. Then, leaders expressed concern about piling up too much foreign debt.
Abdul-Aziz said last year's decision by the ruling military council to reject the loan was premature.
"From a political perspective, they were aiming not to be squeezed by a foreign loan, but it was a political decision, not an economic decision," he said.
The IMF delegation's three-day visit to Cairo is headed by regional director Masoud Ahmed, who will meet Tuesday with lawmakers to go over the government's economic program and discuss the terms of the loan.
Along with meeting Muslim Brotherhood leaders on Monday, Ahmed also had talks with Central Bank of Egypt and Cabinet officials.
A technical team from the IMF will visit Egypt next week as a follow-up to this week's discussions, according to IMF spokeswoman Wafa Amr.