"Getting the country's economy back on track... will not be an easy task," IMF chief Christine Lagarde said in August
International Monetary Fund (IMF) chief Christine Lagarde gives a joint press conference with Egyptian Prime Minister Hisham Qandil on August 22 in Cairo. The International Monetary Fund said Tuesday that Egypt had asked to delay its request for a $4.8 billion loan agreed in November. © - AFP/File
AFP
Last updated: December 11, 2012

Egypt seeks to delay loan request

The IMF said Tuesday that a proposed $4.8 billion loan to Egypt is on hold at the request of Egyptian authorities as protests mount in Cairo ahead of a constitutional referendum.

"In light of the unfolding developments on the ground, the Egyptian authorities have asked to postpone their request for a Stand-By Arrangement with the IMF," an International Monetary Fund spokeswoman said.

The IMF remained in close contact with the authorities and was ready to continue supporting Egypt, she said in a statement.

"We stand ready to consult with the authorities on the resumption of discussions regarding the Stand-By Arrangement. Once these discussions have been completed the next steps can be determined accordingly," she said.

In Cairo, Egyptian Prime Minister Hisham Qandil confirmed his government's request.

"We have officially requested the delay of a month in the negotiations with the IMF because of the political situation in the country," he told a news conference.

The protests, which turned violent last week and which were swelling into mass rival demonstrations on Tuesday, in the biggest political crisis Egypt has seen since the overthrow of former president Hosni Mubarak early last year.

The protesters are deeply divided over a constitutional referendum set for Saturday and proposed by the Islamist president, Mohamed Morsi.

The IMF and Egyptian authorities provisionally agreed the loan in November. The IMF executive board had been expected to review the deal this month.

The loan is aimed at helping the government bridge financing shortfalls through fiscal 2013-2014 as the country rebuilds an economy left battered by Mubarak's ouster.

After lengthy talks delayed by the elections that brought Morsi to power in June, the IMF and Egyptian authorities agreed on the 22-month loan on November 20.

A week later, the IMF said that Egypt could still get the $4.8 billion loan despite fresh political turmoil as long as there is "no major change" in its reform commitments.

Many Egyptians have been concerned that austerity measures tied to the planned loan could hurt the most vulnerable.

Political instability has hammered the tourism industry in Egypt, the country's major source of foreign revenue; has scared off foreign investment, and has deepened the budget deficit.

Qandil said the delay with the IMF would permit negotiations with unions and other economic actors in Egypt over a law hiking taxes on a range of products, including alcohol, cigarettes, soft drinks, steel and cement.

Morsi on Monday suspended that law with a decree "so as not to increase the burden on citizens" and at under pressure from the Muslim Brotherhood, to which he belongs.

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