Egypt and the IMF: needs must
Egypt’s economic outlook is bleak as protests against the country’s ruling military council intensify ahead of next week’s parliamentary elections. The country’s ever more precarious fiscal state may hasten its dash into the arms of the International Monetary Fund – if the IMF will have it, that is.
As Roula Khalaf, the FT’s middle east editor, told beyondbrics: “The problem is that although economically Egypt desperately needs IMF assistance, politically the situation may just be too uncertain to allow them to go to the Fund. Egypt will need some stability before a deal can be reached and considering the current situation, that may be a long time coming.”
Before its resignation, Egypt’s government said last week it had agreed “in principle” to go for the $3bn IMF loan it rejected earlier this year – Egypt’s interim rulers planned to take an IMF loan in June but changed their minds three weeks later because, as Khalaf said: “The military didn’t want to be the ones to have to go to the IMF, because of the stigma attached to such a move and an unwillingness to tie the hands of any future government.”
Outgoing deputy prime minister Hazem El Beblawi had said the government was “considering the right time” to tap the Fund and it is looking increasingly likely that time has passed. As he told Bloomberg on Wednesday: “If the new government is formed within a reasonable time frame, it will have to make the decision on whether or not to proceed.” What constitutes a “reasonable time frame” is anyone’s guess, but time is definitely running out.
Egypt’s political situation is deteriorating as fast as the country’s finances. The ruling generals promised to speed up the handover of power to elected civilians on Tuesday – with Hussein Tantawi, head of the army council, holding out the prospect of a referendum on the army’s role on Wednesday – but the gestures have failed to placate the hundreds of thousands of protesters packing Cairo’s Tahrir Square in a replay of the demonstrations that brought down the rule of Hosni Mubarak.
Parliamentary elections are due to start on November 28 and the future state of any government is unclear. Further muddying the waters, “the elections are staggered and the whole process will take at least two months. The IMF would need some government in place to agree a deal,” Khalaf points out.
Two months would be a long time to wait.
The country’s benchmark EGX equity index has fallen 15 per cent this month and is at its lowest point since March 2009. Although it bounced on Wednesday, up 2.16 per cent by early afternoon trading, any relief is likely to be short lived.