Egypt's request for a US$3.2 billion loan from the International Monetary Fund is encouraging, but such assistance will only have a meaningful impact if it promotes more international support, the global credit rating agency Fitch Ratings said Tuesday.
Egypt has asked the IMF for the loan, a government minister said Monday, as the country's interim cabinet seeks to plug a budget deficit that has continued to increase since Mubarak’s resignation in February of last year.
Fitch Ratings said the loan would reassure international investors that Egypt is implementing clear and sustainable economic policies, which are essential for investment.
"This is turn could stabilize — or even ease — borrowing costs until the transfer of power from the military council, due in June," the agency said.
Talks between the Egyptian government and the IMF began in Cairo on Monday, seven months after a prior military-backed government turned down an IMF offer of $3 billion in financial assistance.
But since then, the country's financial problems have worsened, and its currency has come under heavy pressure.
Fitch Ratings downgraded Egypt one notch to BB- on 30 December, after a substantial fall in foreign reserves since October.
