Egypt edges closer to IMF US$12b loan approval

[CAIRO] Egypt will request a meeting of the International Monetary Fund's executive board within days after meeting the requirements for a US$12 billion loan, the lender's largest ever in the region.

"We are making very good progress on getting the required US$5 billion to US$6 billion" stipulated by the IMF before the board reviews the loan, Egypt's Deputy Finance Minister Ahmed Kouchouk told reporters at a two-day Euromoney conference that began on Monday in Cairo. "It shouldn't be a concern."

A sign-off from the IMF would release the first tranche of a three-year loan signed in August, which officials expect will attract aid and investment to an economy hampered by a foreign currency shortage. Egypt's international reserves of US$16.6 billion are still around 50 per cent below their pre-2011 levels when President Hosni Mubarak was ousted from power, while the pound has been trading on the black market at around a 30 per cent discount to the official rate against the US dollar.

Egypt has secured some of the funding required by the IMF from oil-rich Gulf Arab states, who have already pumped billions of dollars into the economy since the 2013 ouster of Islamist President Mohamed Mursi. It also plans to sell between US$3 billion and US$5 billion in international bonds.

Ahead of the IMF financing, the government introduced a value-added tax, raised electricity prices and sought other cost savings to shrink one of the Middle East's highest budget deficits.

Economists say inflation, currently almost 16 per cent, may reach 20 per cent by the end of the year with the VAT. The new tax led the World Bank and the African Development Bank to release US$1.5 billion of previously agreed loans.

Egypt is also in talks with China for US$4 billion in loans to fund sewage and renewable energy projects, International Cooperation Minister Sahar Nasr told reporters in Cairo.

BLOOMBERG