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23-08-12

Egypt in talks with IMF to borrow USD4.8b

(MENAFN) Egypt entered in talks with the International Monetary Fund (IMF) over a USD4.8 billion loan during a visit by IMF chief Christine Lagarde to discuss helping the cash-strapped country, Reuters reported, citing officials. Egypt's military-appointed interim government had been in talks with IMF for a USD3.2 billion loan before it handed power to President Mohamed Mursi on June 30. The deal was not finalized. Lagarde's visit indicates that both sides "mean business" to close a long-awaited accord after Mursi, who took office on June 30, appointed his first government last month. Lagarde said that the IMF wants to help Egypt to improve stability, restore confidence of investors to re-invest and create jobs in the struggling country and ease the financial burden of very high financing terms. From his side, Egyptian Prime Minister Hisham Kandil said he expected the IMF loan to be for five years with a grace period of 39 months and interest rate of 1.1 percent, adding that the details were still being debated. Egypt's financials have dramatically worsened following an 18 months uprising, as foreign investments escaped the troubled country. The government in the 12 months to June also took nearly USD12 billion, or about 4.5 percent of GDP, directly from the central bank, indicating it was running out of options to fill its budget holes. An IMF deal would help Egypt to add credibility to economic reforms needed to restore investor confidence. Budget deficit for 2012/2013 will represent 7.9 percent of gross domestic product (GDP), down from 8.2 percent a year earlier.

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