Egypt hits problems over IMF loan

Egypt's efforts to secure a critical $4.8bn loan from the International Monetary Fund have run into fresh difficulty, possibly leading the government to seek emergency financing to avoid economic collapse.
The IMF has expressed reservations over a government economic plan needed to seal an agreement that has been in the works, for almost two years, according to people familiar with the negotiations.

At a time when Egypt's foreign reserves have reached $13.5bn -- below the critical level of three months of imports -- Cairo favours a gradual approach to reform even as it is forced to cut its imports of fuel and wheat. Another complicating factor in IMF negotiations is the fact that Mohamed Morsi, the Islamist president, is reluctant to introduce measures such as a sales tax ahead of parliamentary elections.

The poll that had been scheduled to start in April but finish in June has now been further delayed. A court ordered the suspension of the election schedule until the electoral law is reviewed by the Supreme Constitutional Court, which could take several weeks.

Fearful of provoking social unrest at a time of political instability, the Egyptian programme favours small and hesitant steps towards the implementation of austerity measures aimed at raising additional revenue for the state and reducing energy subsidies that eat up a quarter of the budget.

The IMF, however, has informed Cairo that its proposed economic reform programme is not sufficiently robust.