Egypt is unlikely to reach an accord for a $3.2 billion loan from the International Monetary Fund by the end of the year, a senior government official familiar with the negotiations said.
The IMF requires approval from the biggest party in parliament, the official said, speaking on the condition of anonymity because of the sensitivity of the talks. Egypt’s legislature was dissolved by court order last month, a ruling that was reaffirmed this week after President Mohamed Mursi attempted to reinstate it.
“It’s disappointing, but at least it’s been announced against the stabilization of reserves,” Richard Fox, London- based head of Middle East and Africa Sovereigns at Fitch Ratings, said by phone. “If they can maintain reserve levels and continue progress toward political transition it’s not the end of the world. Still, the fact that things have been pushed back yet again isn’t positive.”
The North African country has held negotiations on and off with the IMF for more than a year. Foreign reserves plunged by more than half since the start of the uprising that ousted Hosni Mubarak in February 2011 before recovering slightly in the past three months to $15.5 billion in June. The nation’s domestic borrowing costs jumped by about 50 percent since January 2011 as foreign investors exited the market amid unrest.
Egyptian authorities must win a “broad consensus around the details of the program” that would reassure domestic depositors, investors and the IMF that its measures would be carried out, Masood Ahmed, director of the Middle East and Central Asia for the Washington-based lender, said May 2.
Finance Minister Momtaz el-Saieed in April said Egypt needs to meet about $11 billion of financing needs in 18 months. The country signed a $1 billion loan agreement with the Islamic Development Bank this month.
It’s unclear when or how parliament will reconvene, or whether a new election must be held. Mursi is yet to appoint a prime minister to replace the outgoing Kamal el-Ganzouri after almost three weeks in office.
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