Egypt asks IMF to delay loan due to turmoil

AP News
Posted: Dec 11, 2012 11:41 AM

CAIRO (AP) — Egypt has asked for a one-month delay for a $4.8 billion loan it had agreed with the International Monetary Fund because of the current political turmoil gripping the country, the prime minister said Tuesday.

The IMF confirmed its reception of the request in a statement, saying it stood ready to continue supporting the country and would consult Egyptian authorities about a resumption of loan discussions.

Egyptians are to vote on a disputed draft constitution on Saturday. But disagreements over the draft charter and presidential decrees protecting it against legal challenges have deeply polarized the country, and triggered unprecedented clashes that left at least eight dead over the past three weeks.

Amid the political tension, President Mohammed Morsi decided Monday to suspend a series of tax hikes announced a day earlier on goods including alcohol, cigarettes and cooking oil. The decisions were part of a program to reduce a huge budget deficit.

Prime Minister Hesham Kandil said that although the belt-tightening is a must, political disagreements and tension had made suspension of the measures necessary.

The tax hikes are likely to be highly unpopular, and the opposition has used them to rally Morsi's opponents.

"In a period characterized by political tension and arguments, the president was forced to suspend these (decisions) until there is a societal dialogue around them," Kandil told a news conference. "In this political environment ... we asked to postpone the loan for a month."

The government views the loan as crucial to revive the country's ailing economy and improve the nation's image in the minds of international donors, which could eventually help Egypt secure more loans to help boost its battered finances.

The IMF executive board was expected to vote on the deal on Dec.19.

"In light of the unfolding developments on the ground, the Egyptian authorities have asked to postpone their request for a Stand-By Arrangement with the IMF," said an IMF spokeswoman, speaking on condition of anonymity in line with the organization policies. "The Fund remains in close contact with the authorities, and stands ready to continue supporting Egypt during the ongoing transition and to consult with the authorities on the resumption of discussions."

Kandil said a dialogue with economists and interest groups would begin about the tax hikes next week, but gave no specific date. He warned that continued political instability is further crippling Egypt's already ailing economy.

"If we continue in this political instability, we may not find ground to stand on," he said. "The economy must be kept away from the political disputes because it is a national economic reform program that affects all citizens."