Text size:

  • Small
  • Normal
  • Large

Talks with IMF set on $3.2 billion loan for Egypt

Officials arrive in Egypt today as the government inches closer to sealing a $3.2 billion loan to stave off economic crisis.

IMF officials arrive in Cairo today as the Egyptian government seeks to seal a US$3.2 billion (Dh11.75bn) loan to help to stave off a fiscal crisis.

Stock market investors are betting on a successful outcome to the talks and have pushed the main benchmark up 43 per cent so far this year.

"They need to strike a deal to avert a crisis, and time is not on their side," said Jean-Michel Saliba, an economist at Bank of America Merrill Lynch. "Egypt could manage to hold the fort until June, but if there's any more delay to a deal, the economic situation is likely to get much worse."

The cash is needed to help to bolster confidence in the economy and shore up the government's increasingly shaky finances. Egypt's budget deficit for the financial year ending in June is expected to reach 11.7 per cent of GDP, higher than previous estimates of 10 per cent, official data showed last week.

The money is also required to access support from the United States, GCC states and other foreign investors. Egypt needs about $11bn of external funding over the next two years, Mumtaz Al Said, the finance minister has estimated.

IMF staff are assessing a government plan that lays out a series of reforms. Masood Ahmed, the director of the IMF's Middle East, North Africa and Central Asia department, will head the five-day visit, said an IMF spokesman.

"As we have said in the past, we are ready to support a programme that enjoys broad political ownership and addresses effectively the challenges that Egypt is currently facing," he said.

But the loan deal is far from certain. Egypt's interim military rulers last June spurned an earlier IMF offer, prompted by concerns about saddling future elected governments with unwanted foreign debt.

This time, disagreement about reforms being urged by the IMF could yet derail the process.

"There are still concerns there may be strings attached like reducing subsidies, which would not be popular," said Khaled Sewelam, the director of research and publications at the American Chamber of Commerce in Egypt.

If the IMF cash fails to materialise, gains in Egypt's markets may be lost, analysts have warned. Property and construction stocks have been the main beneficiaries recently. Egypt's cost of borrowing has fallen, with the yield on a 7 billion Egyptian pound (Dh4.24bn) treasury bill sale falling last week to the lowest in more than a month.

"An IMF loan will further help yields drop, Alia Mamdouh, an economist at CI Capital in Cairo, was quoted by Bloomberg News as saying. "If it's not secured, it will have a significant impact, not just on the yields, but also on the stock market and the pound because it would signal the inability of the country to do what's needed to garner the IMF's confidence."

tarnold@thenational.ae

twitter: Follow our breaking business news and retweet to your followers. Follow us

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National