Egypt has strong tendency to accept IMF fund - finmin

Egypt has a strong tendency to accept a $3.2 billion financing package from the IMF that it has previously refused after local debt became "costly," finance minister Hazem el-Beblawi told state news agency MENA on Thursday.

Beblawi said that Egypt needs to diversify its debt and reduce its dependence on local borrowing after treasury bill yields surged to an extent that they couldn't cope with.

"The tendency toward foreign borrowing with its low interest rates and longer payment periods became a reality," MENA quoted Beblawi as saying.

Yields have been rising at recent auctions, Beblawi said last month, and local lenders had nearly reached the maximum they could lend to cover the government's budget deficit. [ID:nL5E7LP3W8]

When Egypt turned down the $3.2 billion package from the International Monetary Fund in the summer, the then finance minister -- since replaced by Beblawi -- said Egypt would rely on domestic sources and that the ruling army was wary about building up debts.

Cairo said Wednesday it will receive $200 million to support its budget from the Arab Monetary Fund this month and a second tranche of financing worth $270 million in December.

Egypt has received other budgetary support from Gulf states to help cover its deficit which expanded after the uprising in February that unseated President Hosni Mubarak.

The government forecasts a budget deficit of 8.6 percent of GDP in 2011/12.