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Egypt asking IMF for $4.8 billion loan

Published:Wednesday | August 22, 2012 | 2:27 PM

Egypt on Wednesday formally asked the International Monetary Fund for a $4.8 billion loan to boost the country's sagging economy and said it expects to reach a final agreement by the end of the year.

Egypt's finances have been badly battered by the political turmoil that has roiled the country since last year's popular uprising that ousted long-time leader Hosni Mubarak.

Securing a loan would help shore up confidence in an economy that has seen tourism revenue and foreign investment dry up and foreign currency reserves plummet by more than half.

State TV said Egypt's leaders requested the $4.8 billion loan during a meeting Wednesday with IMF chief Christine Lagarde in Cairo.

Speaking to reporters after the talks, Prime Minister Hesham Kandil said Lagarde's visit "gives a positive message to Egypt and the whole world that Egypt is stabilizing and that the economy is heading to a recovery."

Kandil said the loan will be doled out in five phases, with an interest rate of 1.1 per cent, and that he expects to reach a final agreement with the IMF by no later than December.

Lagarde, however, said that she didn't discuss the details or the amount of the loan but that the prime minister had a "figure in his mind."

Kandil's government has been holding meetings with top IMF officials over recent days and the details about the deal appeared to have been discussed during those meetings.

Kandil said his government has drawn up an economic plan for the IMF that includes strategies to counter the budget deficit of E£144 billion ($23.6 billion), encourage investment and ensure that subsidies reach those most in need.

Egypt's Finance Minister Momtaz el-Said told the state-run Al-Ahram newspaper in remarks published Wednesday that Cairo hoped to increase the loan from the initial $3.2 billion discussed earlier this year to $4.8 billion to cover the budget deficit that has grown because of shrinking tourism revenues and foreign investment since last year's uprising.

El-Said said he met with IMF officials in Cairo before Lagarde's visit.

Initial talks over a $3.2 billion loan stalled earlier this year because of differences between the then-ruling military and Egypt's political leaders.

The Islamist-led parliament opposed a deal, saying that a transitional government should not sign an agreement worth billions of dollars and carrying heavy financial obligations because it would place a burden on the future government.

The IMF insisted on political consensus before approving the loan, and the talks drew to a halt.

Since then, the parliament has been dissolved by court order in June and Egypt elected Mohammed Morsi, an Islamist from the Muslim Brotherhood, the country's new president, paving the way for renewed negotiations with the IMF.