Egypt considering IMF deal rejected in June

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CAIRO: Egypt is considering International Monetary Fund financing it previously turned down and is still in talks with Gulf Arab states for funds of close to $7 billion, Finance Minister Hazem El-Beblawi said on Wednesday.

Egypt’s economy, which had been growing robustly before the popular uprising earlier this year, was hit hard by the protests, which prompted foreign investors to withdraw funds and saw major revenue sources like tourism suffer.

Egypt reached a $3.2 billion deal with the IMF earlier this year, but the previous finance minister opted in June not to move on with it, partly because the ruling military council did not want to build up debts.

Yields on Egyptian treasury bills rose last month to levels last seen during the global financial crisis in 2008. They have since eased but traders have said Egypt needs external funding to prevent yields surging further.

"Everyone knows that the IMF has proposed a package of aid of $3.2 billion. At the time we were hesitant. Now we won’t change our stand but we are changing our attitude," Beblawi, who took over the portfolio in July, said at a gathering of reporters, officials and executives.

"In the beginning we said we don’t like (it). Now we don’t take any stand, we are discussing and everything is taken into consideration," he said when asked about what foreign sources of financing Egypt was looking for.

Egypt’s foreign reserves dropped $1 billion to $24.01 billion at the end of September from $25 billion at the end of August, a sign of further capital outflows according to analysts.

"We believe that the higher-than-anticipated monthly loss in net international reserves in September 2011 could have been due to foreigners selling their domestic T-bill holdings in August and September 2011," investment bank Beltone Financial wrote.

The minister has said Egypt, which has forecast a budget deficit equal to 8.6 percent of gross domestic product in the year to June 2012, was looking at ways to reduce its borrowing from local banks but has given few details.


Beblawi visited Washington last month to attend meetings of the World Bank and IMF and said before that trip that he was open to discussing ideas with the IMF.

He also said in September that Egypt was in talks on financing worth $5-$7 billion with Saudi Arabia and the United Arab Emirates, but he did not give a breakdown at the time of how much each would offer.

On the Saudi talks, Beblawi said on Wednesday: "A few days ago we were discussing a package consisting of various elements worth $3.9 billion."

He said the Saudi package would include financing for projects and deposits with the central bank. He said this was in addition to $500 million provided earlier by Riyadh.

"We are also discussing a package with the UAE with a total value close to $3 billion," he added.

Beblawi said he aims to up foreign investments to 15 percent of gross domestic product in the coming years, a statement e-mailed by the Finance Ministry said.

"The Egyptian government is keen to attract more foreign investment to the Egyptian market especially in the fields of infrastructure, manufacturing industries and tourism," the statement said.

The government is looking at offering several projects under the private partnership projects model, the statement said. "There are more than 32 projects under study now in several ministries," it said.

The government has four PPP projects in different stages of procurement, including a hospitals project in Alexandria, two wastewater treatment plant projects at Sixth of October and Abu Rawash near Cairo and a road project from Sixth of October to the Rod El-Farag area.

Economists have said PPP may be an important vehicle to channel money pledged by donors to help Egypt plug a balance of payments gap forecast at $11 billion in the 2011/12 fiscal year.

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