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Egypt in talks with IMF, World Bank on loans

By on April 21, 2011

Egypt needs help financing its budget deficit and has discussed obtaining as much as $6.2 billion in soft loans from the World Bank and the International Monetary Fund, Finance Minister, Samir Radwan said.

Egypt, whose economy is reeling under the impact of a revolt that toppled President Hosni Mubarak in February, needs between $3 billion and $4 billion from the IMF for the remainder of the current fiscal year through June and the following 12 months, Radwan said in Washington after talks with the global lender. He also discussed obtaining a $2.2 billion soft loan from the World Bank, according to state-run Middle East News Agency.

Egypt’s budget deficit may widen to 9 per cent of gross domestic product this fiscal year, Radwan said recently in Cairo. Economic growth may slow to as low as 2.5 percent in the same period, compared with 5.1 per cent in the previous 12 months, he said. The minister couldn’t be reached for comment.

The deficit “is still manageable but we cannot sustain that for a long time with a debt-to-GDP ratio at 70 per cent,” Mona Mansour, a research director at CI Capital, a Cairo-based investment bank, said by telephone today. “For the short term yes, but we can’t continue like this because it could affect the country’s sovereign rating.”

Egypt had its credit rating lowered at Moody’s Investors Service and Standard & Poor’s following the protests that led to Mubarak’s departure. The crisis has prompted tourists to stay away from Egypt, weakened the currency and pushed government borrowing costs through treasury bills to two-year highs.

The average yield on 91-day treasury bills surged for the first time since March, gaining 11 basis points, or 0.11 percentage point, to 11.2 percent at an auction yesterday. The rise extended the cumulative surge in costs this year to about 191 basis points, according to data compiled by Bloomberg.

The yield on the government’s 5.75 10-year dollar bond maturing in April 2020 rose 4 basis points, or 0.04 percentage point, to 6.35 per cent, on Tuesday in Cairo, according to prices compiled by Bloomberg. Egypt’s benchmark EGX 30 Index (EGX30) tumbled 3.2 per cent in Cairo trading on Tuesday, extending its decline this year to 30 per cent.

IMF Managing Director Dominique Strauss-Kahn said on April 13 that the lender is ready to help Middle East and North African countries that may need financing after a wave of popular revolts that swept the region this year.

Source : Tribune