Egypt delays IMF loan decision; Gulf aid helps economic reform

A ship passes through the Suez Canal near Port Said, 170km northeast of Cairo (file). Any IMF deal with Egypt would require economic reform commitments that the government might find politically risky.

Reuters

London

Egypt has postponed any decision on taking a $4.8bn loan from the IMF as financial aid from Gulf countries has given Cairo some breathing space as it starts to conduct economic reforms, Deputy Prime Minister Ziad Bahaa El-Din said yesterday.

Bahaa El-Din said Egypt has so far received around $8bn of a $12bn aid package from Saudi Arabia, Kuwait and the UAE promised in July, days after the army toppled former president Mohamed Mursi.

The International Monetary Fund and Egypt have sporadically discussed a possible loan worth up to $4.8bn to help the ailing economy since a 2011 uprising that toppled president Hosni Mubarak drove away tourists and foreign investors, two main sources of foreign currency.

Any IMF deal, however, would require economic reform commitments that the government might find politically risky.

“We have postponed that (IMF) decision for the time being. We are not under the extreme stress that the previous government found itself in,” Bahaa El-Din told a conference in London.

“The assistance that we have from abroad ... This is money that has come at the right time to give us the breathing space to begin to implement those decisions at the pace and in conditions that are much more favourable than when you are pressed to have to sign an agreement today or tomorrow.”

Bahaa El-Din said Egypt was expecting to receive $1bn in aid from Kuwait but did not say when the cash could arrive.

Some $3bn out of total $5bn aid from the UAE will be channelled through infrastructure and utility projects.

He said Egypt is negotiating for more aid from the Gulf which has so far given the country cash transfers and oil shipments. On top of $8bn, Egypt’s central bank has received deposits from the Gulf to improve liquidity.

“Now we all understand and appreciate that this is not a sustainable situation, we are not going to rely every year on getting this kind of money,” Bahaa El-Din said.

“But it also comes to fill the gap that I have to assume is also non-recurrent.”

The minister told Reuters later that he has also signed a $610mn aid package in total from the World Bank to help build a power plant and develop sewage.

A central bank official told Reuters yesterday that Egypt returned $500mn to Qatar on December 2 after Qatar refused to renew the deposit it had made with the central bank.

About a dozen Egyptians who oppose the interim government led by army chief General Abdel Fattah al-Sisi protested outside the Egyptian Cultural Office in central London where the briefing was held.

After the briefing, they shouted “shame on you” to the participants, carrying banners that said “Sisi is a murderer” or a symbol adopted by Mursi’s Muslim Brotherhood supporters after July.

Bahaa El-Din also said the government was in favour of relaxing capital controls imposed after the 2011 uprising. Capital controls help stabilise the currency but deter foreign investment Egypt badly needs.

“Capital controls are not something a country likes to implement. It was imposed under very exceptional circumstances,” he said.

“It’s a function of where we are ... But you have the assurance of this government those capital controls will be relaxed as soon as possible. Some relaxations will be introduced by early next year.”

The central bank has limited Egyptians from transferring more than a cumulative $100,000 out of the country since the 2011 uprising unless they can demonstrate a pressing need for the funds. Many wealthier Egyptians have reached their limit and are no longer able to send funds abroad.

Depositors at banks can only withdraw a maximum of $10,000 in foreign currency per day under central bank rules, but in practice many banks restrict such withdrawals to much less and demand documents proving why the client needs the funds.