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IMF confirms mission to Egypt for aid discussions

CAIRO -- The International Monetary Fund confirmed Thursday it was sending a mission to Egypt to discuss possible financial aid to the country, even as analysts cautioned that the potential lifeline may not be enough to stem serious economic worries that materialized following former President Hosni Mubarak's ouster.

Egypt turned down a US$3 billion IMF load in June, when officials argued that they did not want to saddle a new, post-Mubarak civilian government with additional debt.

In the aftermath of the popular uprising that toppled Mubarak with ongoing political unrest and instability, the country's economic situation has deteriorated sharply over the past year, with net international reserves falling by 50 percent and tourism and foreign investment hammered.

With the yields it is forced to pay on bonds climbing, and its sovereign rating repeatedly downgraded by the three major international ratings agencies, Egypt is scrambling to find funds to cover budget shortfalls as it looks to satisfy an increasingly angry population.

The mission from the international organization will be in Cairo next week to “initiate discussions for possible IMF support” that would serve as the “first step” in the process leading to possible financial assistance, IMF spokesman Gerry Rice said in Washington.

Analysts question whether the funds, if offered and accepted, would be enough to help overcome a financial crunch that is being amplified by depreciation pressures on the Egyptian pound and investor unease with the course of the country's political transition.

“The proposed US$3 billion facility would help plug a gaping hole in the budget. But it would not be sufficient to stabilize the country's growing external payments imbalance,” London-based Capital Economics said in a research note. “A currency devaluation still seems likely.”

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