Egypt has gained political backing for an IMF loan, opening the way for the first tranche to flow from next month, the country's minister of finance has said.
Wrangling between parties has beset negotiations over the US$3.2 billion (Dh11.75bn) funds, required to avert a fiscal crunch. The IMF has insisted it will not release the cash without broad political support for the loan and the linked economic plan.
"A delegation of the IMF has been notified of the approval of the political powers and the Freedom and Justice and Al Nour parties of the loan," Mumtaz Al Saeed was quoted by Al Masry Al Youm newspaper as saying.
"The first part of the loan will start to be paid when the board of directors of the fund meets in May." The first tranche of $1.5bn would carry a 1.2 per cent interest rate, the newspaper reported, 50 per cent higher than officials previously suggested.
Egypt needs the cash to help plug a budget deficit expected to widen to 150bn Egyptian pounds (Dh91.01bn) by the end of the fiscal year in June.
The army-backed government has spent more than $20bn in foreign reserves to help boost the ailing currency since the overthrow of president Hosni Mubarak in February last year.
Even with the funding, however, economists warn the country's fiscal crisis will not be solved. The funds are only expected to cover about 15 per cent of the projected deficit.
"We continue to look for a marked depreciation in the Egypt pound," wrote Simon Williams and Liz Martins, HSBC economists in the Middle East and North Africa region, in a research note.
Focus is now starting to turn to whether an IMF deal can act as a catalyst for other funding pledges.
So far only $1bn has been received by the government since funding promises were made by several foreign donors last year out of a total pledge of $3.75bn.