Egypt loan talks end without deal but IMF sees progress
By Paul Taylor | April 16, 2013 10:00 AM EST
After nearly two weeks of negotiations in Cairo, IMF mission chief Andreas Bauer, in a statement issued early on Tuesday, cited progress, notably in Egypt's efforts to better target fuel subsidies and broaden its revenue base.
"The mission made progress in the discussions with the Egyptian authorities on their economic programme and possible financial support from the IMF," Bauer said.
"Discussions with the authorities will continue with the objective of reaching agreement on a possible standby arrangement in support of Egypt."
Egyptian officials played down the setback, saying talks would continue this week in Washington, and in Cairo after that, and the two sides were closing in on a deal.
"We are travelling to the spring meetings in the next two days and are going to be there in the coming week and will complete the negotiations there, and after we return, the mission will come again for us to complete some of the negotiations," Planning Minister Ashraf al-Arabi, one of the Egyptian negotiators, said in a television interview.
"But the talks are difficult," he told the privately owned CBC channel.
Neither side said why agreement had eluded them but analysts said the ruling Muslim Brotherhood did not want to risk unpopular measures that could hit poor and middle-income Egyptians before parliamentary elections expected from October.
"I don't think they will do any meaningful reform before the elections. That's the bottom line," said Samir Radwan, who was the first finance minister after the overthrow of former President Hosni Mubarak in 2011.
Radwan negotiated a $3.2 billion IMF loan with fewer conditions at the time but the military council that ruled Egypt then vetoed it.
Since then, foreign reserves have more than halved to the critically low level of $13.4 billion, the Egyptian pound has lost about 10 percent against the dollar, tourism and investment have withered and the country faces fuel shortages and power cuts.
An IMF programme could help stabilise the economy in the rocky transition to democracy, unlocking up to $15 billion in aid and investment to improve a dismal business climate.
Western diplomats said the main sticking points were the government's unwillingness to commit to implementing cuts in fuel subsidies and sales tax increases which were the main conditions for IMF assistance.
"The IMF were extremely worried about deterioration of the economy and about lack of seriousness in dealing with the subsidies problem. I don't think they see any sign of change," Radwan told Reuters in a telephone interview.
The brief IMF statement did not mention those concerns. It praised some Egyptian government moves to bring down swelling budget and balance of payments deficits and said the IMF team was encouraged by support for socially balanced economic reform among the government and opposition political parties it met.
Egypt secured $5 billion in stopgap financial support from Arab allies Qatar and Libya last week, removing some of the sense of urgency about obtaining the IMF loan.
Economists said the government could muddle through for several months with funding from Arab sources, but only an IMF agreement would restore business confidence and investment.
"It comes down to the fundamental question of whether Egypt can reform and achieve an economic recovery over the medium-term and that comes down to an IMF-backed programme, which is the key to restoring the confidence of investors, who will not come back without an IMF deal," said Brahim Razgallah at JP Morgan.
The IMF's conditions for lending were milder than past terms for Latin American and Asian countries, not least because the fund's main shareholders, the United States and European nations, see the strategic importance of stabilising Egypt.
By contrast Tunisia, where the ousting of dictator Zine al-Abidine Ben Ali in January 2011 helped inspire the Egyptian uprising in what became known as the Arab Spring, is set to sign a $1.78 billion loan deal with the IMF on Tuesday, a government source in Tunis told Reuters.
"The IMF and the international community want to help but are really frustrated that Egypt isn't doing as much as it should to help itself," said Angus Blair, chairman of the Signet Institute, an economic think-tank for the Middle East and North Africa region. "I expect there is significant frustration."
(Writing by Paul Taylor; Editing by Bill Trott)
Most Popular Slideshows
- Kristen Stewart Moving On With Nicholas Hoult, Jennifer Lawrence Dating Chris Martin – Reports [PHOTOS]
- Chris Martin Dating Reports: Jennifer Lawrence Vs Gwyneth Paltrow [PHOTOS]
- Kate Middleton Suffocated in Kensington Palace, Queen Elizabeth Reported War With The Duchess [PHOTOS]
- 2014 MTV Video Music Awards: Everything To Know [PHOTOS]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Saudi Arabia: Brothers Beheaded For Smuggling Marijuana Into The Kingdom
- ISIS: More Journalists Beheading To Come After James Foley and Steven Sotloff [Video]
- Moto X+1 is Likely Nexus 6 Template; Motorola Shamu is 1st Android Silver with Snapdragon 810 – Reports
- ISIS Posts Graphic Beheading Video of US Journalist James Foley
- James Foley’s Executioner Has British Accent—A Chilling Reminder That ISIS Has Foreign Members
- Nexus 6 Release Date Dilemma with Motorola Shamu Details Pointing to Better Smartphone and Killer Features
- iPhone 6 Release Date Remains On Course for Sept-Oct 2014 as Apple Delays iWatch Debut to 2015