Government officials have issued conflicting statements regarding the economic reform program that was designed in return for a loan of US$3.2 billion from the International Monetary Fund (IMF).
Finance Minister Momtaz al-Saed said the program was unilaterally devised by the government without considering IMF prerequisites. “It aims to reduce the budget deficit without affecting low-income groups, rationalize government spending and apply a maximum wage,” he said, denying any plan to raise taxes.
Meanwhile, an official from the Ministry of International Cooperation, speaking on condition of anonymity, said the program was devised in collaboration with the IMF, as the fund requires guarantees that Egypt will be able to pay back the loan. Possible guarantees include reducing subsidies on petroleum products.
On Tuesday, the privately owned Al-Shorouk daily said that the expected visit by the IMF to Egypt this month has been delayed for "a few weeks."
Egypt, whose economy was hammered by unrest that unseated Hosni Mubarak in February, turned down a US$3 billion IMF facility in June last year. Egypt’s ruling military generals are reluctant to accumulate debts without a popular mandate.
Economists say it now risks a full-blown currency and budget crisis unless it can drum up urgent funding from abroad. Ministers have indicated Egypt may now be prepared to return to the negotiating table.
The IMF's visit was postponed upon the Egyptian government’s request, the newspaper quoted Planning and International Cooperation Minister Fayza Abouelnaga as saying. However, the IMF said at the time that it had postponed it's mid-December visit due to security concerns. The IMF said in late December that it maintains "close contact" with Egyptian authorities on possible funding.
The international body said benchmarks for any funding package would need to "come from a program designed and owned by the Egyptian authorities and enjoying the broad political support necessary for its successful implementation."
Economists say Egypt is heading for a currency crisis if it does not swiftly stabilize its economy, battered by political turmoil that prompted an exodus of investors and tourists.
Because of worsening economic conditions, the country may now need as much as US$15 billion to stave off a full-blown financial crisis, some economists say.