April 7, 2013 11:47 am

Egypt seeks increase to IMF loan

Egypt is seeking an increase to its $4.8bn loan request from the International Monetary Fund, the country’s planning minister said on the weekend, amid growing signs of social discord and economic pressure.

Egypt’s minister for planning and international co-operation, Ashraf al-Araby, said officials now in talks with a visiting IMF team in Cairo were proposing to increase the loan from the $4.8bn agreed in previous negotiations in order to close the country’s widening budget gap. A spokesman for Mohamed Morsi, president, declined to confirm the request, saying only that talks were ongoing.

“Negotiations are being held now for an increase of the $4.8bn to help close the deficit gap,” Mr Araby was quoted as saying on Saturday by several newspapers.

“We are trying to get a fast signing to the preliminary loan agreement from the IMF representatives in Cairo to pave the way for the final vote by the board of directors of the IMF in June.”

The country’s deficit has grown from about 8 per cent to 10 per cent or more of GDP.

Egypt’s economy has suffered a series of blows since the 2011 downfall of Hosni Mubarak as president ushered in a new era of political and economic uncertainty and officials and analysts say its economic woes are worsening. Foreign currency reserves dropped from $36bn before the 2011 uprising to $13.4bn at the end of March, down slightly from $13.5bn at the end of February, according to the Central Bank.

While the request for an increase has not been confirmed by other Egyptian officials, it is not unexpected. IMF Middle East and Central Asia chief Masood Ahmed told reporters in Dubai last week that Egypt may need to change its loan request.

Mr Araby predicted Thursday that a deal with the IMF would be concluded within two weeks – potentially unlocking billions more in financial aid for the country – but diplomats say that Egyptian authorities have been reluctant to dramatically slash costly fuel and food subsidies that would help balance Egypt’s books but potentially further enrage a nation already facing price inflation, wage stagnation and high unemployment.

This weekend saw a spate of violence around the country. On Friday, five people were killed in sectarian violence between Christians and Muslims on the northern outskirts of the capital.

Funeral services for the victims on Sunday turned into angry protests against the Muslim Brotherhood and Mr Morsi, a former leader of the group. Ferocious clashes at a Christian Cathedral in the Abbasiya district of Cairo resulted in at least 17 injuries and police intervention after unknown men attacked worshippers holding a service for those killed.

Dozens were also injured in fiery anti-government protests in central Cairo business district that continued into early Sunday morning in a display of anger at the Islamist government accused of trying to monopolise power.

In another setback, railway drivers demanding higher bonus payments staged a strike on Sunday that crippled transport and commerce across the country, including the economically crucial link between the capital and the second-largest city, Alexandria.

Hisham Qandil, prime minister, appeared to be trying to prepare Egyptians for potentially painful moves in a televised Friday evening speech. He described reduction of energy consumption as a national duty regardless of whether Egypt took on the IMF loan. Mr Araby on Saturday said the government would also seek to close its budget by seeking to increase taxes on the rich and negotiate with Baghdad over $1.3bn in debt owed by Iraq to Egypt since the 1990s as well as trying to unlock other potential aid.

Additional reporting by Camilla Hall in Dubai

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