Global General

Egypt says will not need IMF, World Bank funds

(Agencies)
Updated: 2011-06-25 19:18

In this March 23, 2011 file photo, Egypt's Finance Minister Samir Radwan speaks to the media as the Egyptian stock exchange celebrates its reopening, in Cairo. [Photo/Agencies]

CAIRO - Egypt will not borrow from the World Bank and International Monetary Fund after revising its budget and cutting the forecast deficit, even though a loan had been agreed, Finance Minister Samir Radwan said on Saturday.

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, the minister said.

"So we do not need to go at this stage to the Bank and the Fund," Radwan said, adding Egypt, which had borrowed from the IMF under ousted president Hosni Mubarak, still had the "best relations" with the two US-based institutions.

Despite the budget revisions, the government said it still expected growth of 3.0-3.5 percent, in line with previous forecasts, which some economists said could prove optimistic.

Egypt this month agreed on a $3-billion, 12-month standby loan facility from the IMF, which Cairo had said came with more lenient terms than usually associated with such lending.

The IMF and World Bank had been among a range of foreign countries and bodies to offer funds to Egypt to help cover a big budget shortfall after the economy was plunged into turmoil by the mass protests that drove Mubarak from office on February 11.

Egypt's cabinet had approved on June 1 a budget for 2011/12 that increased spending by a quarter to create jobs and help the poor. That was revised in a new draft announced on Wednesday that included raising income tax and reducing fuel subsidies.

Gulf Arab states are among those who offered support.

Radwan said Qatar had provided $500 million for budgetary support in the past week. "That is a gift," he said, when asked if there were any conditions attached to the Qatari cash.

He said Saudi Arabia had earlier offered a similar amount.

The minister said the first draft of the budget, which forecast a deficit of about 170 billion Egyptian pounds, was discussed with activists, writers, the business community, trade unions and non-government organisations.

Army concern

"As a result of this dialogue and given the concern of the military council not to have huge debts for the government that comes after the election, the deficit was reduced to 134 billion pounds, equivalent to 8.6 percent of GDP," Radwan said.

"The result is we didn't need outside finance. We are covering the largest part from local sources and we are waiting for outside support to come in," he said.

"If we had gone with the other package, we would have needed to go (to the IMF)," the minister said, adding the new budget would not go back on a commitment to social justice.