A senior official at the Finance Ministry said on Monday that the Egyptian government is resuming negotiations with the International Monetary Fund (IMF) for a loan of US$3 billion, the same loan that the military council declined four months ago so as to avoid more debts.
The source, who spoke under the condition of anonymity, told Al-Masry Al-Youm that the loan would bear an interest of 1.5 percent, to be paid in arrears, the first intallment of which would be in five years from approval.
Egypt reached an agreement with the IMF over a US$3.2 billion loan in June. However, former Finance Minister Samir Radwan rejected the agreement, following the objections of the Supreme Council of the Armed Forces (SCAF).
Radawan said then that after revising the country’s budget and cutting the forecast deficit, Egypt would not borrow from the World Bank and International Monetary Fund.
According to official figures, the 2011/12 deficit in the first draft budget was forecast at 11 percent of gross domestic product, but was revised to 8.6 percent because of a national dialogue and the ruling army council's concerns about debt levels.
Experts argue that the economic situation in the country has deteriorated because of the political uncertainty facing the nation that managed to topple one of the region's harshest autocrats.
Some Gulf counties proposed economic packages for Egypt. On Saturday, the United Arab Emirates said that it plans to provide US$3 billion in financial aid to Egypt.
Saudi Arabia said it would provide a package worth US$3.9 billion in budgetary support, loans and treasury bills. Qatar has given a grant of $500 million.
The current finance minister, Hazem al-Beblawy, is meeting with an IMF delegation in Cairo on Tuesday to discuss the loan.
The delegation is assessing economic developments in Egypt so as to provide the government with recommendations for tax and financial policies, as well as ways to manage the public sector, as part of the annual consultation that the IMF provides.
For his part, Beblawy said the government has signed a loan with the IMF and another with the World Bank in Washington, but denied any agreement on a certain rate of interest.
“Our financial situation is very bad, and we have a cash flow problem,” he said. “One way out is to borrow from international institutions.”