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Election limbo keeps Egypt’s IMF loan on ice
In the end, the fate of Egypt's reforms and the IMF loan is likely to be sealed on the streets.
March 19, 2013 5:46 by Reuters
“NO ELECTION LINK”
The Islamist-led administration, which is at loggerheads with the liberal and leftist opposition about the very character of Egypt, denies the stalled elections will determine the timing on an IMF loan.
“All the discussion was about financial support or the loan that Egypt aims to obtain from the Fund,” government spokesman Alaa El-Hadidi said after Sunday’s visit by the IMF official, the first since January. “There is no link between the loan and parliamentary elections.”
But officials of the IMF and its biggest shareholder, the United States, regularly stress that the reforms need to win backing, or at least acceptance across Egyptian politics.
Consensus seems a remote possibility. Many opposition parties had already decided to boycott the elections in a series of disputes including over the electoral law, a new constitution written by an Islamist-dominated assembly and a Mursi decree last year when he temporarily gave himself sweeping powers.
Indicating the divide in Egyptian life, Hadidi said the economic programme had been sent to the political parties “some of whom disagree with anything the government presents”.
Hadidi spoke of technical-level talks lasting between one and three weeks, but no date has yet been announced for when they would start. Ahmed, who heads the IMF’s Middle East and Central Asia Department, gave little away after he met Prime Minister Hisham Kandil and central bank GovernorHisham Ramez.
“We agreed that our discussions would continue diligently over the coming weeks with the aim of reaching agreement on possible financial support from the IMF,” said Ahmed.
William Jackson of Capital Economics in London noted the IMF seemed to believe a deal might take some time. “This probably reflects the difficulties of passing any reforms with the political situation so volatile and without elections,” he said.
The IMF has raised the possibility of a bridging loan to tide Egypt over, an idea rejected by Cairo as it pushes for a full loan in return for a full reform programme.
SWALLOWING ITS PRIDE?
But Cairo might have to swallow its pride as the $36 billion in currency reserves that Mubarak left behind had shrunk to just $13.5 billion at the end of last month.
“If there’s a sudden deterioration in sentiment and investors wish to take their money out of Egypt, then the pound will come under more pressure,” said Jackson. “In this situation, the authorities may agree to a bridging loan from the Fund to prevent a sharp fall in the pound.”
Investors have already been shaken by a series of high-profile legal actions against prominent business figures, including travel bans and freezing of their assets, over issues ranging from tax demands to insider dealing allegations.
This will make it tough to implement unpalatable polices. “No minister or senior government official wants to bear the brunt of taking radical decisions at a stage when mass demonstrations, imprisonment and travel bans are inches away from everyone,” said Hany Genena, head of research at Pharos Securities Brokerage.
In the end, the fate of Egypt’s reforms and the IMF loan is likely to be sealed on the streets.
Safwat Hassan, a 44-year-old marble trader, said Egyptians would resist sharp price rises resulting from subsidy reform. “The people do not accept this and there will be anxiety and demonstrations,” he said. “This issue will not pass lightly.”
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