IMF head Lagarde: IMF loan for Egypt won't be enough

IMF head Lagarde: IMF loan for Egypt won't be enough

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Thu, 19/04/2012 - 21:25

WASHINGTON, D.C. — Egypt's request for a US$3.2 billion IMF loan will not be enough to meet the country's financial needs and will require additional resources from donor countries, the head of the International Monetary Fund said on Wednesday.

"It will not be sufficient, and everybody knows that, so it will require other donors, other participants to also come to the table to help Egypt," IMF Managing Director Christine Lagarde told a news conference before the start of the IMF and World Bank meetings in Washington.

"As is always the case, we will play the catalyst role that we always play," she added.

The IMF has said there is no timeline for concluding its loan talks with Egypt. It has insisted that any IMF financing package needs the broad support of all political parties in the country, especially given upcoming elections in June.

However, Khairat al-Shater, the Muslim Brotherhood’s original nominee for president who was recently disqualified, has said that the group would not accept an IMF loan unless its terms were changed or a new government was formed to monitor how it was spent.

The country's transition to civilian rule should culminate at the end of June, when the military hands power over a newly elected president for whom the economy will be a top priority.

Since the overthrow of Hosni Mubarak, Egypt's army-backed government has shored up the economy largely by drawing down reserves and borrowing from domestic banks, with interest rates having risen to historic highs as funds grow tighter.

The government has spent more than $20 billion in foreign reserves to prop up the country's currency since last year's uprising. Reserves fell by another $600 million in March to $15.12 billion, equivalent to less than three months of imports.

An Egyptian government official said on Thursday Saudi Arabia will deposit $1 billion in the Egyptian central bank and buy T-bonds valued at $750 million by the end of the month as part of a $2.7 billion support package reached with Riyadh this week.

Lagarde said the IMF stood ready to help Egypt but emphasized that an IMF-backed loan program needed broad political support.

"With IMF programs, it takes 'two to tango,' right? So, we are ready," Lagarde said. "We have identified the needs. We are reaching out to all appropriate authorities in the country, and we want political endorsement," she added.

However, she added: "If we hear solid partners on the ground say, I am not too sure about this program, not too sure about the IMF, not too sure about borrowing, it is a bit of an issue."