CAIRO: Egypt will reopen talks with the IMF next month on a $4.8bn loan, a minister said yesterday, and the government laid out plans to reverse a slide in currency reserves and tackle the dire state of public finances.
A revised government economic reform programme, essential for securing a lifeline from the International Monetary Fund, called for a levy on stock market transactions and a flat 25 percent tax rate for Egyptian companies, many of which are struggling for survival in a national economic crisis.
Investment Minister Osama Saleh expressed hope that help was on its way as Egypt battles with a falling currency and a budget deficit soaring to unaffordable levels. “There have been pledges of international and regional support to Egypt and most of these are in progress,” he told a conference in Dubai. “Negotiations with the IMF over the $4.8bn loan will resume in early March.”
Cairo and the IMF agreed in principle last November on the loan, based on an earlier version of the reform programme, but talks were suspended in December at Egypt’s behest due to street violence. Any IMF deal would involve unpopular austerity measures just as Egyptians vote in four-stage parliamentary elections due to be held from April until late June.
Under the latest programme, the government will impose a 0.001 percent levy on stock market transactions and corporate tax will be standardised at 25 percent. Current rates are 20 and 25 percent, meaning tax bills for some firms will rise at a time of great economic hardship.
The programme also seeks to end the alarming slide in foreign currency reserves as the central bank has tried to prop up the Egyptian pound in recent years. It targets reserves of $19bn by the end of June, climbing to $22.5bn a year later. Reserves tumbled to $13.6bn in January from $36bn before the overthrow of president Hosni Mubarak in February 2011, and the Egyptian pound has fallen 8.2 percent since the central bank began auctioning dollars at the end of December.
Economists expressed caution about the figures, and whether Egypt could secure IMF help by the end of the financial year in June. “They had their targets before and they didn’t reach them,” said Mona Mansour, chief economist at CI Capital. “Maybe they are targeting to have the IMF programme by then, but I think it will be difficult. Other than that, they may have an agreement with regional countries,” she said. Reuters
