Egypt and the International Monetary Fund will begin talks in Cairo this week on a possible 18-month $3 billion IMF loan to ease immediate balance of payment needs following months of political turmoil, an IMF source said on Tuesday.
The IMF said on Jan. 3 talks with Egypt were planned for January and it was still discussing the timing of a mission.
The Washington-based lender did not confirm that talks would begin this week, saying only it stood by the earlier statement that talks would take place in January.
The IMF source told Reuters that Egyptian Prime Minister Kamal al-Ganzouri had requested the talks with the global lender. IMF Director for the Middle East and North Africa, Masood Ahmed, will lead the initial discussions with the authorities this week, the source added.
Economists have warned that Egypt is headed for a currency crisis if it does not swiftly stabilize an economy battered by more than a year of political turmoil, which unseated Hosni Mubarak in February.
However, the possibly of a $3 billion loan package is unlikely to be enough to ease concerns about Egypt’s growing economic problems, with some economists suggesting the country may need as much as $15 billion to stave off a full-blown financial crisis.
The government has been struggling to find ways to finance its deficit as interest rates on some treasury debt has soared to above 15 percent and prospects of financial help from regional partners like Saudi Arabia have faded.
Investors and tourists have fled the country amid ongoing political uncertainty, with staggered elections look set to give the Islamist Muslim Brotherhood a dominant role in Egypt.
The country’s military rulers rejected a $3 billion IMF loan negotiated in June last year, saying it did not need the funds. Analysts said the military generals were reluctant to take on debt without a popular mandate.
A new IMF loan could be made available under the IMF’s recently launched Rapid Financing Instrument, designed to provide poorer IMF member countries financing with relatively few strings attached. At the time, the IMF said the facility might be helpful to countries in the Middle East and North Africa hit by political upheaval.
The source said the IMF loan would be roughly 300 percent of Egypt's IMF quota, which determines how much a member country can borrow from the lender. The 2009 global financial crisis saw IMF lending soar, with amounts far exceeding members' allowed quotas.
The IMF said on Dec. 27 any funding would have to be based on economic benchmarks that had broad political support.
IMF Managing Director Christine Lagarde said in December the IMF has $35 billion available to lend to countries in the Middle East and North Africa that request financing.