After two weeks of negotiations over a possible $4.8bn loan deal to prop up Egypt s flailing economy, an IMF team will probably return on Tuesday without a deal to Washington, where talks are likely to proceed, officials and diplomats said.
Hisham Qandil, Egyptian prime minister, said that negotiations over terms of the loan may continue on the sidelines of the IMF s spring conference in Washington, the Financial Times reported on Monday.
Despite the intense talks and the IMF s continuing efforts to reach out to the political constituencies throughout Egypt, President Mohamed Morsi s government and the international lending institution failed to forge a compromise that would increase Egypt s revenues and reduce costly subsidies for fuel and food without sparking further political unrest.
The loan is considered a critical step in strengthening the country s finances and paving the way for other development aid. Egypt s crucial foreign currency reserves have dwindled from $36bn before its 2011 revolution to $13.4bn as of late March, hurting the value of the country s currency and raising borrowing costs.
Close observers of the IMF negotiations said the institution finds itself in a bind. Though it s eager to help Egypt, it s reluctant to loosen loan requirements for fear of having other countries demand similar treatment. Negotiators are said to be discouraged by the Morsi s government s bargaining tactics.
Qatar and Libya agreed in recent days to contribute $5bn toward steadying the Egyptian economy, which may have emboldened Mr Morsi s government to hold out for more favourable terms with the IMF.
Terms of the disagreements between the government and the IMF have not been made public, though officials close to the negotiations say Mr Morsi has resisted
raising consumption taxes that would enrage his political base ahead of upcoming parliamentary elections. Morsi announced a series of taxes on consumer goods
last year only to rescind them within hours under pressure from his own Freedom and Justice party.
Morsi s political rivals have also been reluctant to endorse the loan deal, despite the lobbying of the IMF. After meeting with IMF officials including Andreas
Bauer, delegation chief, on the weekend, Hamdeen Sabahi, leftist-nationalist opposition leader, issued a statement opposing any loan which affects the lives
of the poor and sets conditions which entail the elimination of subsidies, raising prices and reducing salaries .
Meanwhile, the IMF on Monday appeared close to finalizing a precautionary $1.78bn loan approval for Tunisia, another north African country that underwent a revolution and is attempting to resuscitate its economy.