Last updated: 30 December, 2012

Egypt wants to resume talks on IMF loan

Prime Minister Hisham Qandil said on Sunday that Egypt wants to resume talks with the International Monetary Fund in January on a $4.8-billion loan frozen this month because of political tensions and unrest.

“We have invited (the IMF) to resume talks during January,” Qandil told a news conference in Cairo.

He said the sum involved was “small,” but “its value is in the sign of confidence it gives to the Egyptian economy,” which he admitted was in difficulty although talk of bankruptcy was not in order.

The request for a loan, made last August, was suspended on December 11 for a month, with Cairo saying the postponement was “because of the political situation in the country.”

The presidency of Mohamed Morsi is going through its worst crisis since his election in June, mainly over a referendum on a new Islamist-drafted constitution that was approved by 64 percent of voters but in which the secular opposition alleged fraud.

The likelihood of prolonged “elevated” political conflict despite the adoption of the constitution prompted the ratings agency Standard and Poor’s to knock Egypt’s long-term credit rating down a peg this week to “B-“.

Egypt has also frozen a series of planned tax rises aimed at bringing state finances into line with the expected terms of the IMF loan but which could have had serious social repercussions.

“The economic situation is difficult, there’s no doubt about that,” Qandil told reporters on Sunday, adding: “But we cannot talk about bankruptcy.

“The problems are difficult and complex. We have huge challenges to meet after the revolution,” he said, adding however that “there is a light at the end of the tunnel… and the length of this tunnel depends on us.”

Since the February 2011 ouster of long-time strongman Hosni Mubarak, the economy has nosedived as investment from abroad has dried up and key revenue-earner tourism has taken a major tumble.

In a speech to the senate on Saturday, Morsi tried to sound a note of optimism.

“I say to all, both at home and abroad, the state of financial institutions is not what some are trying to picture,” he said, adding that foreign reserves increased by $1.1 billion from July to $15.5 billion in November.

“We cannot even consider this satisfactory. In June 2010 it was $35 billion. But in July 2012 it was $14.4 billion,” he said.

“But with Egypt now approaching stability, and with a sense of responsibility, we will do our utmost to double it (reserves) in future.”

However, the Central Bank said in a statement later on Saturday that foreign currency reserves were critically low and must not be allowed to sink further or the country would not be able to meet its external debts. It did not give a figure.

And on Sunday the state-run MENA news agency reported that the Egyptian pound was trading at 6.36 against the dollar, compared to 6.1 a month ago — its worst level since the ouster of Mubarak.