IMF loan, reforms both vital for Egypt: analysts

IMF approval of Egypt's request for nearly US$5 billion in aid would come as a vital boon to its reeling economy but President Mohamed Morsi must at the same time enact tough reforms, analysts say.

An economic slump following the February 2011 ouster of Hosni Mubarak aggravated the main problems inherited from his regime: budget-draining subsidies, extreme social inequality, corruption and poor energy infrastructure.

A chief concern is the decline in central bank reserves which have plunged from US$36 billion at the start of January 2011 to US$14.4 billion, threatening Egypt's ability to import basic goods such as wheat and refined oil products.

The budget deficit is projected to increase by 12.5 per cent over the fiscal year from July 2012 to July 2013, to about US$22.5 billion, official figures show.