Egypt seeks to close deal with IMF

14 November 2012

Government to cut gasoline subsidies to win favour from IMF

Egypt is looking to sign an agreement with the International Monetary Fund (IMF) for a $4.8bn loan. A delegation from the fund is due to leave the North African country on 14 November after conducting a study into the country’s economic reform plans.

The loan will depend on the government’s ability to prove it has a strategy to tackle the government’s growing budget deficit and boost economic growth.

The Egyptian government expects to sign a memorandum of understanding before the IMF team leaves. In an effort to close the deal, Egypt has announced plans to eliminate subsidies on 95 octane gasoline.

The government wants to secure the IMF funds to narrow its budget deficit currently running at 11 per cent of GDP.

In 2011 Egypt’s gross government debt represented 76.4 per cent of its GDP. The IMF predicts this will increase to 79.7 per cent and 81.1 per cent in 2012 and 2013 respectively.

No official economic strategy has been released by the government, but it has been suggested that measures could include raising sales taxes on goods and services.

The lack of clarity around the proposed loan has attracted criticism from some Egyptian political groups who have sent an open letter to the Egyptian government and the IMF.

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