International Monetary Fund in Cairo to finalise loan deal now set at $4.5 billion, government prepares attached economic program, says Momtaz El-Said Wednesday
Egypt's negotiations with the International Monetary Fund (IMF) are set to conclude by 15 November and the loan signed by the beginning of January 2013, Egypt's Finance Minister Momtaz El-Said said on Wednesday.
The loan amount, initially set at $4.8 billion was reduced slightly to $4.5 billion, El-Said said to state owned daily Al-Ahram.
"The loan is linked to Egypt's share in the fund's capital and due to variances in exchange rates the loan amount is likely to be reduced," El-Said explained.
Egypt's share in the IMF is around $1.5 billion or some 0.4 per cent of total capital.
Egypt is in the advanced stage of talks with the IMF to acquire a loan for fiscal support. An IMF delegation is currently in Cairo negotiating details of the economic program.
A decision is expected to be taken after the delegation presents the results of the visit to he IMF's board in Washington.
Egypt's deficit is officially projected to reach LE140 billion, around 7.9 per cent of GDP. Many observers, however, expect the deficit to miss the forecast and edge up to LE160 or LE170 billion.
The government is reportedly preparing the economic program, a condition upon which the loan is approved.
While the program's details have not yet been made public, many speculate that it will include measures to slash Egypt's hefty subsidy bill and increase revenues.
El-Said added that Egypt plans to allocate 10 to 15 per cent of any extra revenues in the state budget to "social expenditures" including health and education.
"Funds made available through rationalising subsidies or adjusting the tax code will be directed to the 'social dimension' and social spending," explained El-Said.
Egypt runs a tight education and health budget as subsidies and debt service take up a large portion of the state spending.
President Mohamed Morsi had promised in his electoral platform to significantly increase spending in both areas but the current year's budget, seeing just 8 per cent increase in total expenditures, seems far from the president's promise.
Spending on education, for example, makes up 12 per cent of total state spending – some LE64 billion – but the quality of the services provided remains far from impressive.
Health is in a similar situation: the current allocated five per cent has not appeased health workers or patients.
President Morsi had promised to raise the health budget to 15 per cent during his term, a task commentators say is difficult to implement.