News Analysis: Egypt needs economic stability to secure IMF loan
[Xinhua] As Egypt's talks with International Monetary Fund (IMF) for a 4.8 billion U.S. dollars loan are set to resume on Monday, many consider the approval of the loan relied on Egyptian government's ability to overcome the worsening economic crisis and fulfill financial obligations.
IMF official and technical staff will visit Egypt on Monday to discuss the loan, Egyptian Prime Minister Hesham Qandil said Sunday, stressing that his government will reassure the delegation about the country's economic situation and methods of improvement.
Whether Egypt could obtain the loan, depends on whether the Egyptian government could rationalize spending and increase revenues, said Mohamed Abdel Aziz, professor of funding at the American University in Cairo.
Abdel Aziz told Xinhua that the loan aims at helping Egypt deal with economic crisis, with the amount equal to Egypt's share as an IMF member, therefore there should not be hard strings attached to the deal.
"I expect the Fund will finalize the agreement without constraint," he said, noting that the IMF will ask for a program that guarantees Egyptian steps to reduce budget deficit.
In light of the economic crisis, the IMF is bound to study the Egyptian government's program carefully in terms of the volume of financial liquidity and Egypt's abilities to provide it in the future, Abdel Aziz noted.
As for whether the loan could help Egypt at this time of soaring budget deficit and decreasing currency reserve, Abdel Aziz said "the loan will provide the government with liquidity, by which it could minimize the budget deficit with its very low interest rate of 1.1 percent."
Securing the loan will help Egypt get more loans from IMF instead of other institutions, he added.
If the loan is approved, the eight biggest countries, particularly the United States, will provide Egypt with aids.
The IMF loan depends on Egyptian Central Bank's procedures to float the currency and Egyptian government's measures to deal with budget deficit and taxes, said Hamdy Abdel Azim, economic professor in Sadat Academy.
"When IMF sees effective procedures by the Central Bank to administratively float the currency, it will approve the loan," Azim told Xinhua.
Azim said Egypt should abide by the IMF's conditions, which include reducing governmental expenditures, increasing taxes and freeing local currency.
According to Azim, the loan will improve economic conditions in Egypt and push other granting countries to provide Egypt with long term loans.
Posted by: Fred 2013-01-08