IMF says any assistance it might grant to Egypt must have a broad political support (Photo: AP)
The International Monetary Fund (IMF) said on Tuesday it plans to meet with Egyptian authorities to discuss the country's economic problems, but added that any funding would have to be based on benchmarks that had broad political support.
"The IMF team is looking forward to discussions in January with the authorities on their economic programme to address Egypt's difficult economic and financial situation," an IMF spokesperson said in an emailed statement.
The statement said any funding programme would need to "come from a programme that is designed and owned by the Egyptian authorities and enjoys the broad political support necessary for its successful implementation."
The IMF says it has remained "in close contact" with Egyptian authorities since early November on possible funding, but security concerns caused it to postpone a planned visit to Cairo in mid-December, it said.
A report published by Al-Masry Al-Youm Tuesday said that the IMF actually cancelled their visit to Egypt due to the country’s credit rating and negative economic projections. The IMF statement emphatically denied such claims.
On Thursday, Prime Minister Kamal El-Ganzouri told the nation on television that Egypt had gone to the IMF but the international body had not responded.
"We were told it was necessary for Egypt to deal with the IMF to get loans. Our colleagues made the request, but nothing has come yet. We requested again but they (the IMF) asked for a short delay."
In June, Egypt declined a $3.2 billion facility from the IMF because the ruling military council was said to have objected to the idea of foreign involvement in Egypt.
"The easiest thing would have been for the military council to accept the loans from abroad, give it to Egyptians to live a better life and then hand over power and the Egyptian people would have been responsible to repay these debts," General Mokhtar al-Mullah told reporters earlier this month. "So we have said that these loans are only for extreme need."
A top level ministerial committee indicated on Sunday that foreign borrowing has become a necessity for the Egyptian economy to cover the deficits in budget and the balance of payment along with the drop in international reserves. The borrowed amount will range from $10 billion to $12 billion.
The budget deficit for the financial year 2011/2 was forecast to stay at 8.6 per cent of GDP but the recent cabinet announcement pushed it upwards to 11.7 per cent of the GDP.
The Central Bank Governor Farouk El-Okdah said the budget deficit in the year that began on July 1 could rise as high as LE182 billion instead of the LE134 billion forecast last June.
Egypt's foreign currency reserves plunged to about $20 billion in November from $36 billion at the end of 2010, and economists say this could force the country to devalue its currency as soon as the first quarter of 2012.
Other available options to solve Egypt’s liquidity shortage have been depleted over the past ten months, with yields on T-bills surging to their highest levels in years and local banks’ credit ratings hurt by local borrowing.