Egypt sees IMF funds as ‘last resort’
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Emerging Markets

Egypt sees IMF funds as ‘last resort’

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While a $3 billion IMF standby facility remains on the table, Egyptian policymakers insist that they will only take it up as a last resort

Egypt remains reluctant to accept the offer of a $3 billion IMF standby facility, despite a shortfall of previously committed donor funding and private investment, senior policymakers have revealed.

The government refused a 12-month IMF standby facility in late June, despite a run on foreign reserves during the first half of the year and continued concerns about its dwindling revenues.

Senior policymakers say that the offer remains on the table, but that the government will only take it up as a “last resort”.

“The government and the ministry of finance is keeping this as a last resort, it’s not rejected it officially, but it’s put it off”, Farouk El-Okdah, governor of the Central Bank of Egypt (CBE), told Emerging Markets in a rare interview. “Until there is a need for it, [the government] [will not] ask for it, and if there’s no need they might get away without it.”

A senior minister whose portfolio includes relations with donors and NGOs suggested that popular suspicion of international financial institutions was the primary driver behind Egypt’s decision to reject the IMF’s offer.

“The IMF facility was one of the least stringent I have seen, but we still decided to turn them down,” Gouda Abdel-Khalek, solidarity and social justice minister, told Emerging Markets.

“Egypt has a long history of suffering from foreign indebtedness”, and “a government drawn from the people chosen by the people” doesn’t want to go down that route again, he said. “The decision not to borrow from the IMF fell under our general policy but it also reflected unease at the IMF.”

El-Okdah argued that Cairo could hold on until the economy picks up because “there is enough liquidity in the domestic market to finance the budget deficit”.

However, many international analysts disagree, arguing that a post-revolution slump in T-bill sales and the CBE’s efforts to stabilize the Egyptian pound by drawing on reserves have left the country facing a potential payments crisis within months. In its new World Economic Outlook, the IMF forecasts that the Egyptian economy will grow at 1.2% in 2011 and 1.8% in 2012, down from 5.1% in 2010.

The government sees regional banks as coming with fewer “strings attached” than the Fund and Bank, and expects new funding to come from the African Development Bank and Islamic Development Bank soon.

But according to both El-Okdah and Abdel-Khalek, government funding from Gulf states has so far fallen well below public statements. Abdel-Khalek said that inflows from some Gulf donors carried dangers of their own.


“There is an agenda behind a lot of NGO funding, which the government is very uneasy about.” This includes Saudi and Qatari funding – substantial amounts of which go to the increasingly assertive Salafyist Islamist groups, critics complain – as well as US and other support for civil society groups.

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