Managing Director of the International Monetary Fund (IMF) Christine Lagarde said that loan negotiations with Egypt had stumbled due to political instability in the country, stressing that “stability is a sine qua non condition for the loan”.
In an interview with the BBC on Friday, Lagarde said that President Mohamed Morsi’s decision to retract raising taxes in some sectors for political reasons hindered negotiations between the IMF and the government.
She confirmed that the IMF sees negotiations with Egypt as important and hopes for a strong and constructive dialogue on the loan, pointing out that the talks also include meetings with representatives of the opposition.
Lagarde said she visited Egypt in August shortly after the appointment of Prime Minister Hesham Qandil’s government to emphasise the fund’s interest in Egypt. “We will come back again,” she said. “And we have a team conducting negotiations in this regard that returned to Egypt a few days ago.”
She stressed that any decision made by the IMF must pass through the representatives of the 188 member states.
Lagarde denied claims that the IMF’s insistence on the removal of some subsidies as a condition of the loan aims to put restrictions on the poorest groups of society, mentioning that nearly $200tn is spent annually on subsidies across the world but that “the real question is who gets the support and who really deserves it”.
She added that the IMF wanted to make sure through specific procedures that subsidies helped the target groups who represent a small fraction of the total recipients.
Lagarde denied that the negotiations were disrupted by the severe economic crisis in the Eurozone, confirming that the Egyptian economic reform plan is progressing very fast and that the IMF team is doing its best to resolve the issue. She pointed out that the fund and the government had almost reached a deal last November.
After a long series of negotiations between Egypt and the IMF, a preliminary agreement was reached in November on the $4.8bn loan.
However, ratification of the deal was postponed following unrest across the country.