IMF: Egypt economy deteriorating, needs reform plan

The International Monetary Fund said Thursday that Egypt's financial situation is deteriorating and the lending agency won't move ahead with a $4.8 billion loan until receiving updated economic information and reform plans from President Mohammed Morsi's government.

Negotiations have dragged on for more than a year for the crucial funding, which is expected to usher in unpopular austerity measures. But by building confidence, the money could open the door for more loans and investment.

IMF spokesman Gerry Rice told reporters that the agency was working with Egypt to ensure that the loan package would successfully address "rising fiscal and balance of payment imbalances" and lead to broad economic growth.

Strains in Egypt's economy include a widening budget deficit and shrinking foreign currency reserves.

The 2011 uprising that toppled Egypt's longtime autocratic ruler, Hosni Mubarak, dealt a blow to foreign investment and tourism, a main revenue source. Neither has recovered, with investors and tourists still scared away by unrest and political turmoil.

Egypt's budget deficit has surpassed 10 per cent of gross domestic product. The finance minister has said the draft spending plan for the budget year beginning in July projects a deficit of $28.5 billion, which is about $1.7 billion more than this year.

With revenues down, the government is burning through its foreign currency reserves, which have fallen to just $14.4 billion, less than half of pre-uprising levels.