By Alexandra Alper / Reuters
WASHINGTON: The International Monetary Fund said on Friday Egypt’s government and political partners have made good progress in agreeing on the content of economic measures that will make up an IMF funding program for the country.
“We feel there is some progress in terms of getting a commitment and broad buy-in to the objectives and the measures” of a program, including among those who are likely to be involved in implementing it after the elections, said IMF Director for the Middle East Masood Ahmed.
Egypt and the IMF are in discussions on a $3.2 billion loan program, which had been opposed by the powerful Muslim Brotherhood’s Freedom and Justice Party. But the FJP now appears to be on board.
The delay in sealing the deal, which the government had hoped to secure in March, has brought the country closer to a fiscal crisis that could lead to a jump in consumer prices and interest rates, a big currency devaluation and huge pressure on banks.
The IMF is insisting that any agreement on financing is backed by Egypt’s government and political partners ahead of June elections. This would ensure the deal would outlast the political transition following the polls.
Ahmed said the IMF agreed with Egypt’s estimated financing needs of $10 billion to $12 billion, part of it funded by the IMF and the rest by donors.
Saudi Arabia has said it will deposit $1 billion at the Egyptian central bank by the end of April as part of a $2.7 billion package to support Egypt’s battered finances.
Egypt’s foreign reserves have tumbled by more than $20 billion to $15.12 billion during the political turmoil and spasms of violence since Hosni Mubarak was ousted from power last year. The budget deficit has spiraled.
Region faces headwinds
Growth in Egypt and throughout the Middle East and North Africa continues to lag due to political instability and lingering drags from the European debt crisis, Ahmed said.
Mass social unrest in countries such as Egypt and Tunisia has cut tourism throughout the Middle East and North Africa, while the crisis in Europe has cut remittances and dampened capital flows into the region.
Turning to Egypt’s neighbor, Ahmed said Tunisia is probably most vulnerable to a deepening debt crisis in the euro zone, thanks to its close links on trade, remittances and tourism.
Investors also remain cautious about conditions in Tunisia, he noted.
“There is a still a wait-and-see attitude amongst investors that is holding back the recovery in private investment,” he said, adding the country has not sought IMF financing.
Tunisia’s tourism sector has slumped since last year when autocratic leader Zine Al-Abidine Ben Ali was ousted in a popular uprising that sparked the Arab Spring.
Uncertainty in Libya — which saw its own autocratic leader Muammar Gaddafi toppled after months of fighting — is creating a drag on Tunisia’s economy, he said.
“One of the big shocks for Tunisia last year was the consequence of the spillover from Libya and the recovery in the Libyan economy is still a bit uncertain,” he said.
Ahmed said Lebanon’s economy was quite resilient, despite instability in Syria.
Syria’s Bashar Al-Assad has been under sharp international pressure to stop a violent crackdown against a year-old opposition movement.
An advance team of UN monitors is due to deploy in Syria in the coming week to monitor a fragile ceasefire that has so far failed to stop the bloodshed.
The fund forecast growth of 4.2 percent for the region in 2012, and 3.7 percent for the following year.