IMF says prepared to aid Libya, Egypt

Reuters News
Posted: Sep 12, 2011 1:19 PM
IMF says prepared to aid Libya, Egypt

By Andrew Torchia

LONDON (Reuters) - The International Monetary Fund is prepared to provide external financing to Libya if necessary but does not expect the country to need such help beyond the short term, a senior official of the global lender said on Monday.

"If there is a need for short-term financing, the IMF is there to provide," Masood Ahmed, director of the Fund's Middle East and Central Asia department, said in an interview.

But he added that Libya was not likely to need an extended aid program, since an estimated $150 billion of sovereign assets once controlled by ousted Libyan leader Muammar Gaddafi and his inner circle, now frozen abroad, would ultimately be available to the country.

"In the medium term, it should be able to finance itself," he said.

The IMF is expected to play a key role in channeling international aid to countries affected by Arab Spring uprisings. On Saturday the Fund said it was willing to provide up to $35 billion in loans to those countries and announced it recognized Libya's ruling interim council as a legitimate power.

Ahmed said the IMF was ready to send a team of experts to Libya to assess the state of its economy as soon as security conditions permitted. The team will focus on issues such as how well payments systems and banks are operating, he said.


Ahmed also said the IMF remained willing to lend money to Egypt if Cairo changed its mind and asked for assistance. Egypt's military rulers turned down an offer of $3 billion from the IMF in June, vowing to fund their budget deficit with domestic resources and loans from wealthy Arab governments.

"If in coming months they find that their financing needs are such that they want to look again at external sources including the IMF, the IMF is there for Egypt as it is for all its members," he said.

Some analysts think Cairo may struggle to finance the deficit under its current plan, especially if the domestic debt market has trouble absorbing a large amount of government paper or the global economic slowdown hurts growth and tax revenues in Egypt.

Ahmed said the IMF was encouraged by some economic policy changes planned by the Egyptian government, including reforms to its subsidy system that would improve the distribution of cooking gas to poor people, and moves to raise the prices paid to farmers for their crops.

In a report presented to finance ministers of the Group of Eight nations in Marseille on Saturday, the IMF predicted Egypt's gross domestic product would grow 1.8 percent in the fiscal year through June 2012, only slightly faster than 1.2 percent growth last fiscal year, when the economy was hit by the unrest which overthrew Hosni Mubarak. Growth is projected at 4.0 percent in 2012/13.

(editing by Ron Askew)