Egypt needs more financial assistance, says IMF official

Egypt will need further international assistance to put its economy back on track, despite receiving huge loans from Gulf States, the International Monetary Fund said on Friday.

"Egypt will need financial support which could come from its partners in the Gulf or, if the government wants that, from the IMF and from other international financial institutions," Christopher Jarvis, the IMF's Egypt mission chief, told reporters.

Jarvis renewed calls for Egypt to reduce fuel subsidies, stressing that they are “painful for the budget” and adding that the IMF stood ready to assist.

The IMF was in talks over a $4.8bn bailout package for Egypt during the presidency of Mohammed Morsi, although discussions came to an end after a military coup removed him from power last year.

The loan has proved problematic in Egypt, with opponents claiming the loan terms would hit ordinary Egyptians the hardest. Previous Cairo visits by IMF officials have sparked protests by civil rights groups that condone subsidy cuts to food and fuel subsidies, seen as a pre-condition of IMF support. 

On Thursday, Egypt's Planning Minister Ashraf al-Arabi was quick to stress that the government would not reopen talks with the IMF until at least after elections expected to take place on 26 and 27 May. Ex-army chief Abdel Fattah el-Sisi is expected to win the vote by a landslide. 

“Egypt will not seek a loan from the IMF during this transitional period” Ashraf al-Arabi, Egyptian Planning Minister, said during a press conference. 

Gulf States have publicly backed the post-coup leadership, giving substantial loans to Egypt and supporting their designation of the Muslim Brotherhood as a terrorist organisation. Egyptian officials have said the country has received $10.93bn in the past year from the United Arab Emirates, Kuwait and Saudi Arabia, with significantly more assistance promised in the future. 

“We expect to receive generous Arab Gulf aid after the next presidential elections, and this aid is primarily tied to a victory by Field Marshal Sisi,” an unnamed Egyptian diplomatic source recently told Al Monitor.

Presidential elections are planned to take place on 26 and 27 May and ex-army chief Abdel Fattah el-Sisi is expected to win by a landslide. 

However, a largescale political crackdown has been enacted since Morsi's overthrow, with human rights groups condemning the government's increasingly brutal response. 

“There is a growing climate of intolerance towards any legitimate criticism of the authorities” Hassiba Sahraoui, deputy Middle East and North Africa director of Amnesty International, said in a recent statement.

Aid from the Gulf has been split between stocking up on imported fuel and being deposited in the Central Bank to fund wages for public sector workers, pay overdue state contractor salaries and support public housing projects. Unlike the IMF this aid does not seem to come with economic conditions, such as subsidy reform. This makes it less politically divisive but concern is nonethless growing that the cash injections will not encourage Egypt to enact much-needed reforms and will not be sufficient to reverse Egypt's poor economic results. 

Egypt faces “big challenges” including low growth, high unemployment and an increasing budget deficit, the IMF’s Jarvis said.

The Egyptian interim-government’s draft budget for 2013-14 revealed a deficit of $23.9bn, which is equivalent to 11% of the GDP, and showed public debt to be $187bn, or 85% of GDP.