The Multilateralist

Will the IMF and Egypt have to renegotiate?

Will the IMF and Egypt have to renegotiate?

The Financial Times‘ Andrew Bowman is skeptical that the International Monetary Fund’s planned $4.8 billion loan to Egypt will go through anytime soon:

The loan is conditional on some very unpopular tax increases and fuel subsidy cuts to reduce the deficit to 8.5 per cent during the financial year starting July 2013. The government is loathe to take these on at this moment in time with its authority fragile and new elections looming in 2013. Indeed, when it tried to introduce new taxes on consumer goods a few days before the constitutional referendum, it removed them within a few hours following public outcry. Its loan request has been postponed until January and the delay may entail renegotiation.

Meanwhile, continued uncertainty regarding the IMF loan appears to be shutting down other avenues of financial support for the Eyptian government, whose reserves are running low. Via the New York Times:

Earlier this month, the African Development Bank said it would only disburse its $500 million loan when the country concludes its agreement with the I.M.F., Bloomberg News reported, while this week Germany said it was postponing a €240 million, or $320 million, partial debt relief plan for Egypt, citing concerns over the tumultuous political situation, according to the newspaper Berliner Zeitung.