Egypt expects to sign a $3.2 billion financing deal with the IMF after receiving a lukewarm response from the expatriate community on an Islamic bond offering.
Egypt to sign $3.2bn loan deal with IMF
Egypt expects to sign a US$3.2 billion (Dh11.75bn) financing deal with the IMF after receiving a lukewarm response from the expatriate community on an Islamic bond offering.
Last week, Momtaz El Saeed, Egypt's finance minister, announced plans to offer $2bn worth of sukuk and certificates of deposits aimed at Egyptians living abroad. But wealthy expatriates are wary about investing in the debt offering, which is aimed at reducing borrowing costs and stemming an economic crisis triggered after the revolution.
"I would rather directly invest in a project," said Mohamed Hamdy, 29, who works as an investment director at a family office in Abu Dhabi. "I don't have the confidence that the existing institutions can allocate money in the right way. There is no plan for how the money will be used, whether infrastructure or employment," he added.
The North African country needs $11bn to cover its budget deficit and finance economic reforms this year. The official Al-Ahram newspaper quoted Mr El Saeed as saying that an IMF delegation would visit Cairo next month to sign the agreement for the three-phase, $3.2bn loan.
"The interest rate on the loan is 1.2 per cent, and it will be used to support the budget for 2012-2013," he said. The loan will be paid in three instalments, with the first tranche as soon as the agreement is signed, he added.
Egypt's foreign reserves plummeted 50 per cent last year to $18.1bn, and steadily declined to $16.4bn last month, the most recent data published by the central bank shows.
The Muslim Brotherhood, the country's leading political party after winning the largest block of seats in the first parliamentary elections since the toppling of president Hosni Mubarak, is seen as inexperienced in policymaking.
"Egypt will not solve its economic problems with religion. Many of the members served many years in jail by the previous regime," said Kamal Lamie, a 62-year-old Copt in Abu Dhabi. "How are these people expected to lead the country out of an economic crisis?"
Copts, who number as many as 4 million outside Egypt, are unlikely to invest amid a perception of rising political Islam in Egypt.
"The Muslim Brotherhood have already started dialogue on a number of small issues in the country but have failed to address ours," Mr Lamie said. "If the government needs the money, where is Egypt's money? The money stolen by Hosni Mubarak and the people close to him?"
A committee formed in August last year is taking the lead on identifying and confiscating former president Mubarak's assets.
"The committee is dedicated to finding the money, but these things take time," said Mahmoud Ghozlan, the spokesman for the Muslim Brotherhood in Cairo. "Egypt's economic climate is on fire."
He continued: "No foreign investor will want to put their money [there] as long as there is political uncertainty, whether through liquid investments such as equity or direct investment.
The IMF is really our last resort. In Arabic, we have a saying: Credit is nothing but worry that begets worry. Getting Egyptians to invest in their own country's future is the best option."
At Lazeez Coshari, a restaurant in Abu Dhabi named for the inexpensive popular vegetarian dish of a similar name, patrons said they would fork out their savings to boost the country's economic crisis.
Mohammed Rashad, a 30-year-old Egyptian who serves up the dish at the restaurant, is working to pay for his legal studies with the hope of eventually returning home to work as a lawyer.
"I want to work in Egypt. I want to see that all my labour to pay for my studies has resulted in good cause. I want to see Egypt's economy prosper," said Mr Rashad. "As long as the government will fulfil its role in improving security and the economy."
Mohamed Ibrahim, 26,, who works at the Chillax Cafe in Abu Dhabi, said the Muslim Brotherhood is closer to "the street" and knows what the country needs.
"I would definitely invest," Mr Ibrahim said. "Because it's my country, and no matter how long I stay here, I will end up going back to retire."