The Egyptian government on Wednesday welcomed a visit by International Monetary Fund Chief Christine Lagarde and asked for an increase of the loan offered by the Fund.
During her visit to Cairo, Lagarde met President Mohammed Mursi and Prime Minister Hisham Qandil and stressed the need for a reform program to deal with the country’s economic crisis.
“The loan in general terms is worth 3.2 billion U.S. dollars. We talked about increasing it up to probably 4.8 and maybe more,” Qandil told a joint news conference with Lagarde.
He said Egypt was seeking a signing by the end of 2012 of a loan agreement based on an interest rate of 1.1 percent and a five-year repayment period following a 39-month grace period.
“This high level visit by the IMF which comes very quickly after new government formation sends a positive message not only to Egypt but to the whole world that Egypt is stable and the Egyptian economy is headed for recovery. We will agree on a timeline and road map that will see a loan agreement signed by November or early December. The government has decided to seek foreign borrowing and the IMF conditions are acceptable to us,” Qandil said.
The Islamist Freedom and Justice Party, that holds the most seats in the Egyptian parliament, appeared to welcome an IMF loan despite the party previously rejecting an economic program attached to the loan presented by the military backed transitional government
“The Egyptian president confirmed democratic transition is happening on two levels, political and economic and the economic level definitely needs the support of international institutions. Our view of the IMF, the president confirmed, is that it’s not just a funding organization but it’s an international institution that support confidence in the national economy and encourages other organizations to invest in Egypt,” Yasser Ali, a presidential spokesperson, said.
Lagarde indicated the conditions attached to the loan would be discussed in negations over the coming weeks and months
“They will return to Egypt to go into the details and the terms and the conditions of the program which is clearly the journey that is identified by the authorities of the county and the financing that goes with it. Under the IMF rules, programs have to be fully financed,” Lagarde said.
The IMF would be a partner to Egypt as it embarks on a journey of economic reform to restore stability, boost investor confidence and create jobs, she said.
The fiscal, monetary and structural reforms would require “determination” and “political courage,” the IMF chief added.
Lagarde’s visit came as Mursi, Egypt’s first civilian and Islamist president, moves to consolidate power after his election in June. It follows more than a year of instability since an uprising which toppled his predecessor Hosni Mubarak.
State media on Wednesday reported that Mursi is to visit the United States on September 23 to attend the U.N. General Assembly in New York and hold talks with “senior officials” in Washington, where the IMF has its base.
Egypt’s economy has been hard hit by the 2011 uprising, a fall in tourism revenues, slump in foreign investment, decline in foreign currency reserves and widening of the budget deficit.
Tourism, one of the main sources of revenue and a job provider for 10 percent of the population, is making a recovery but security concerns have kept foreign investors at bay.
Meanwhile, central bank reserves have plunged from 36 billion dollars at the start of January 2011 to 14.4 billion dollars, threatening to curtail Egypt’s ability to import basic goods such as wheat and refined oil products.
Mursi, who rose from the ranks of the Muslim Brotherhood to the presidency, appointed Qandil as prime minister on August 1 and tasked him with improving security and living standards in Egypt.