Egypt’s military rulers turned down an offer
of $3 billion from the International Monetary Fund in June, vowing to
fund a budget deficit from domestic resources and foreign aid. “There
are talks about a package coming from Arab countries, from Saudi
Arabia, from the Emirates. We are under discussion, but both of them
have presented proposals of a couple of billion dollars each,” Egyptian
Finance Minister Hazem el-Beblawi told Reuters on the sidelines of a
meeting of Arab finance ministers in the UAE capital. Asked when he expected a deal to be reached, he said: “Before the end of the year. It should be quite soon.” No
particular conditions were attached to the packages, el-Beblawi said,
with repayment expected in around five years. He did not give the exact
amounts involved. The government has said it hopes to finance a
projected 134 billion pounds spending gap by raising 14 billion pounds,
or about $2.4 billion, from Arab countries and 120 billion pounds from
the domestic treasury bill market. Saudi Arabia and Qatar have
already given a total $1 billion. UAE officials have been discussing a
$3 billion package, the previous finance minister said in July. El-Beblawi
also said that Egypt — whose economy was thrown into crisis by the
uprising against long-time ruler Hosni Mubarak earlier this year — was
likely to receive a new drawing facility from the AMF, with the deal to
be signed before the end of 2011. “It is almost free of conditions.
One of them is the so-called automatic loan that we are entitled to
draw any time. The other is related to financial reform,” he said,
adding that the loan’s interest rate was around 1.5 percent. Egypt
has also not given up on IMF aid, el-Beblawi said, but it preferred
loans from Arab countries and financing from the local market to cover a
budget gap of 8.6 percent of gross domestic product forecast for this
fiscal year. “For the time being, we are still assessing the
situation. We consider it as an option, it is not accepted, it is not
refused,” he said. To avoid tapping the IMF cash, the government has
revised the budget that began on July 1 by cutting forecast spending by
24 billion Egyptian pounds ($4 billion). The military has been
reluctant to be tied even to the lenient terms offered by the IMF as it
seeks to avoid any foreign interference. A Reuters estimate
suggested the government needs to raise at least 50 billion pounds a
month in T-bills and bonds to meet its financing needs. However, the
ministry has decided not to take the full amount on several recent
T-bill sales. “We do not want to pressurize the local market, to
crowd out financing for the local market, but also, we would like to
keep the interest rates at this level. Because you increase the amounts
and you risk raising interest rates,” el-Beblawi said. He said earlier on Wednesday that tapping international markets with a Eurobond issue was not being considered. The
minister also said that the current pound exchange rate was good for
the economy, which he saw growing by 2 to 3 percent this fiscal year. “I
think the longer we maintain the current rate, the better. Not only for
the health of the economy but also to keep the right signal for the
market players,” he said. The pound has been floating between 5.92
and 5.98 to the dollar since April compared with 5.83 before the revolt,
which scared off investors and sent tourists packing, started in late
January.
