Egypt must convince people of need for IMF: Lagarde
By Joe Bavier, Reuters
January 10, 2013, 12:04 am TWN
ABIDJAN -- Egypt's government must strongly endorse a US$4.8 billion IMF loan agreement to its people as a step towards stabilizing an economy pummeled by a turbulent transition from autocratic rule, the head of the world lender said on Tuesday.
Egypt concluded an initial agreement with the International Monetary Fund in November but postponed concluding the deal last month due to political unrest triggered by President Mohammed Morsi's drive to fast-track a new constitution.
The political strife sparked a rush to sell Egyptian pounds, sending the currency to a record low against the U.S. dollar and draining foreign reserves. The IMF loan is crucial to plugging Egypt's balance of payments and budget deficits.
"The IMF needs to have the commitment of the political authorities that can actually endorse the program, own it, and propose it to the population as theirs," Christine Lagarde told Reuters during a visit to Ivory Coast.
Confronted by lethal street violence after Morsi awarded himself sweeping powers in November, the president postponed planned tax increases seen as part of a package of austerity measures needed to secure the IMF loan.
Egypt must now renegotiate some terms of the accord, and economists say the IMF board's approval is not a certainty — especially if there is any sign of government wavering over implementing what are likely to be unpopular conditions.
While any specific terms are yet to be made public, any IMF demands to cut spending or remove price subsidies will be hard to sell to an already fractious population ahead of parliamentary elections, more than two years after Hosni Mubarak was ousted in 2011 after 30 years in power.
The IMF's Middle East and Central Asia director, Masood Ahmed, traveled to Cairo and met Morsi on Monday.
"Based on what I've heard from my director of the Middle East, we are at a good tipping point," Lagarde said. "I'm pleased the mission will be resuming its activities on the ground shortly."