By: Nada Badawi
Egypt has refused an International Monetary Fund (IMF) ‘bridge loan’ of $750m in emergency funds, announced Minister of Finance Al-Morsi Hegazy in a press conference on Tuesday.
“We have done what was required of us in terms of the social and economic reform programme,” he said. “It is our right as a nation, and as a member nation of the IMF, to receive 300% of our quota, or $4.8bn.”
Minister of Planning and International Cooperation Ashraf El-Araby said on Sunday that Egypt does not need the bridge loan.
The emergency fund falls under the IMF’s Rapid Financing Instrument (RFI) facility, which offers rapid and low-access financial assistance to IMF member countries with urgent balance of payments problems, without the need for a full-fledged IMF programme.
Al-Araby said that Egypt rather “needs broad structural measures to tackle its budget deficit”.
Egypt could have had access to almost $750 million in emergency funds, limited to 50% of the country’s quota per year and 100% of its quota in total.
Egypt’s IMF quota stands at $1.4bn.
The IMF’s quota system allows for the raising of funds for loans to member country. Each member is assigned a quota, or a contribution, based on the country’s relative size in the global economy. Countries contribute money to a pool through the quota system and can use this fund to borrow temporarily in case of payment imbalances.
“Use of the RFI could be an option if there is a need for interim financing, while a strong medium-term policy programme is being put in place,” IMF spokeswoman Wafa Amr told Reuters.
This comes amid the IMF’s reservations on Morsi’s pledged economic reforms, with anonymous IMF sources expressed skepticism on their effectiveness.
The Egyptian government unveiled a modified economic programme in February, which aimed to meet conditions set by the IMF, for the proposed loan.
These included tax increases, curbing subsidised fuel, and some other approaches.
Egypt’s budget deficit hit 10.9% of the country’s GDP for this year.
An anonymous source from the Ministry of Finance revealed last week the IMF’s dissatisfaction with the programme: “The IMF’s comments should come as no surprise since the country is embroiled in ongoing political and social turmoil.”
Despite the IMF’s dissatisfaction with the reforms, Egyptian state media reported yesterday that an IMF team is expected to visit the country in the next few days to resume talks over the $4.8bn loan.
“Egypt has extended an official invitation to the fund to visit and view its economic reform programme, discuss it and comment on it,” Al-Araby said to state news agency MENA.
But on Monday, the IMF said that no date was set yet for a visit to Cairo.
Egyptian Cabinet spokesman Alaa El-Hadidi also said that no timing was set for the delegation to visit the country, despite Al-Araby’s statement.
Morsi’s pledged economic reforms have sparked protests, due to the increase in prices of subsidised fuel and taxes on many goods and services.
The measures come as an attempt from Morsi to meet qualifications set by the IMF to hold Egypt eligible for the loan.
But the current political scene and ensuing violence on the country’s streets have postponed negotiations over the loan many times.
Additional reporting by Hend El-Behary