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Egypt getting ready for IMF deal this week
The Egyptian government expects to sign a memorandum of understanding with the International Monetary Fund for a $4.8 billion loan before an IMF negotiating team leaves Cairo on Wednesday, Finance Minister Mumtaz al-Said said.
November 12, 2012 6:33 by Reuters
The government also plans to eliminate its subsidy on 95 octane gasoline effective as of Wednesday or Thursday, he said, a move that suggests the government wants to show it is taking active steps to close the deal.
Egypt has been drawing up an economic reform plan in part to help convince the IMF it is serious about economic reform. Analysts say the IMF usually requires that governments take active measures before signing off on loans.
“We will sign a preliminary memorandum of understanding before they leave,” the minister told Reuters by telephone, adding that the team would remain in Egypt until Wednesday.
The government wants the $4.8 billion IMF loan to help it narrow a budget deficit running at 11 percent of gross domestic product and a balance of payments deficit that has gobbled up more than $20 billion of its foreign reserves since the uprising that toppled Hosni Mubarak in February 2011.
Egypt’s cabinet will meet with President Mohamed Mursi on Tuesday to review the government’s “comprehensive development plan”, Prime Minister Hisham Kandil said on his Facebook page. The meeting would be followed by a news conference, he said.
No economic plan has yet been released to the public. But government officials have outlined a range of proposed measures such as cutting back on fuel subsidies, raising the sales tax on goods and services and taxing IPOs on the stock exchange.
Leaks to Egyptian media are seen as an effort to prepare the public for steps that are certain to be unpopular.
Among the measures reported in recent days are raising the price of natural gas piped to homes as of next month and a one percentage point increase in sales tax to 11 percent.
The government is also proposing higher taxes on telephone use and purchases of passenger cars, cigarettes and tobacco, beer and alcoholic drinks, non-alcoholic beer, carbonated mineral water, coffee beans and water-resistant cement.
Drivers pay 2.75 Egyptian pounds ($0.45) a litre for 95-octane fuel, well below the international price. The price of lower octane fuel used more widely by the poor will remain unchanged for the time being, officials have said.