Bloomberg News

Two Egyptian Parliament Committees Back IMF Loan-Linked Plan

April 11, 2012

Two committees in Egypt’s parliament supported economic plans linked to the country’s loan request from the International Monetary Fund, an official with the biggest parliamentary bloc said today.

“We said that we support the government measures related to signing an agreement with the IMF as long as they don’t hurt low-income people,” Ashraf Badreldin, a lawmaker with the Muslim Brotherhood’s Freedom and Justice Party, said by phone. This support was given with the understanding the funds are unlikely to be disbursed to the current interim government of Prime Minister Kamal el-Ganzouri, who was appointed by the ruling military council, he said.

“The timeline for implementing an agreement would mean that Egypt would start getting money after the current government leaves,” said Badreldin, deputy head of parliament’s planning and budget committee, which along with the economic affairs committee has met with an IMF mission that ended its visit to the country yesterday.

Official Request

Egypt officially requested the $3.2 billion loan from the fund in January, with talks prolonged by wrangling between the government and the Islamist-dominated parliament. The IMF has requested broad political support for a loan-related economic plan to ensure it’s implemented beyond the transitional period. The ruling military council says it will hand power to civilians by the end of June.

The government’s proposed measures include reducing the budget deficit through speeding up the implementation of a value-added tax and “rationing” fuel subsidies without harming low-income people, according to a statement by parliament’s economic committee. They also include “maintaining an effective and orderly exchange market that reflects demand and supply forces and contributes to increasing foreign-currency reserves” and “attracting other sources of external financing,” it said.

“Our understating is that, according to the timeline, Egypt will not receive this money before the end of June,” Badreldin said. “We don’t have trust in the existing government’s ability to manage the money in a way that will achieve the hoped-for goals.”

Economic Boost

Egypt’s loan request is part of efforts to boost an economy struggling to recover from a drop in investment and tourism. The IMF loan could mobilize more support from donors, analysts including Raza Agha, London-based senior economist at the Royal Bank of Scotland Group Plc, have said.

The economy contracted in 2011 as political instability deterred investment and tourism, while net international reserves are down more than 50 percent since the uprising that toppled Hosni Mubarak.

The IMF mission to Egypt said in a statement yesterday that it made “good progress” in discussions with Egyptian authorities and will remain in “close contact” in the coming weeks.

“A financial arrangement to support Egypt’s economic program will be presented to the IMF Executive Board once this work is completed, and external financing from bilateral donors and other international institutions is confirmed,” it said.

“We don’t want it to seem as if we’re standing in the way of such an agreement as a political position against the current government,” Badreldin said. The position of the two parliamentarian committees “provides the government with support in the procedures toward signing an agreement,” he said.

Freedom and Justice party officials, including Badreldin, had earlier said the government failed to answer questions they raised including how the loan would be spent. Parliament would still need to approve a loan agreement with the IMF if one is signed, Badreldin said.

To contact the reporter on this story: Mariam Fam in Cairo at mfam1@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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