Egypt says close to securing 3-year IMF loan programme

CAIRO: Egypt said it was close to agreeing an International Monetary Fund (IMF) lending programme to ease its funding gap and restore market stability and was seeking to secure US$7 billion annually over three years.

Prime Minister Sherif Ismail ordered the central bank governor and minister of finance to complete negotiations for the programme with an IMF team that will visit Egypt in the next few days, the cabinet said in a statement.

“We are resorting to the IMF because the budget deficit is very high, between 11 and 13 percent within the past six years,” finance minister Amr el-Garhy, said in a phone interview with presenter Lamis El-Hadeedi on a private TV channel late on Tuesday.

In Washington, the IMF welcomed Egypt’s request for financial support and said it would send a mission to Egypt for about two weeks from July 30.

The cabinet statement, after a five-hour meeting, was the first official confirmation that talks with the IMF were under way.

The statement said talks had been ongoing for three months.

“The prime minister stressed the need to cooperate with the IMF through the support program to enhance international confidence in the economy and attract foreign investment, and therefore achieve monetary and financial stability ... targeting US$7 billion annually to fund the programme over three years,” the cabinet statement said.

The government is seeking US$12 billion from the IMF, US$4 billion a year, which will carry an interest rate of 1 or 1.5 percent, el-Garhy said.

The package includes issuing US$2-3 billion in international bonds which will be offered as soon as possible, between September and October, he added.

Economists welcomed the news, which came after a turbulent few weeks for Egypt’s currency, the pound, which has plummeted to new lows on the black market as confusion mounted over the direction of monetary policy.

“It’s great. Finally,” said Hany Genena, head of research at Beltone Securities Brokerage.

“Confidence will be restored in the government and central bank.

Secondly, we will see flotation of the pound, if not tomorrow, next week, the week after.” Genena said he expected the Cairo stock market to surge after the news and for the currency to strengthen on the black market.

The black market had already strengthened slightly from lows near 13 to the dollar on Monday.

Two black market traders contacted by Reuters said they were selling dollars at about 12.80 to 12.85 pounds after the IMF deal was announced.

“I think the stock index will hit 8,000 in the next couple of days,” Genena added. — Reuters