Thursday, May 03, 2012

(This story was originally published Wednesday.)

-- Program needs broad political support

-- Work on economic program "still unfolding," IMF official says

By Leila Hatoum

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--The International Monetary Fund is still waiting for the Egyptian government to present a viable economic recovery plan that enjoys broad political support before it can approve a $3.2 billion loan to help the country deal with its financial difficulties, a senior IMF official said Wednesday.

Masood Ahmed, the IMF's director for the Middle East and central Asia, said the plan will need to address Egypt's fiscal and economic imbalances, generate investor confidence and deal with social issues, as well as receiving support from Egypt's parliament and political leadership.

"As soon as there is a program that addresses all these issues, we will be ready to present this" to the IMF board for approval, Ahmed said in an interview with Dow Jones.

Work on such a program "is still unfolding," Ahmed said.

The Egyptian government has said it hopes to get final approval for an IMF program by mid-May, before the first round of presidential elections starts on May 23. But the government has been struggling to get the support of all the country's political parties for its existing economic reform plan, which has been criticized for being too vague.

Last week, only 6 out of 365 members of Egypt's parliament, which is dominated by the powerful Muslim Brotherhood, voted in favor of the government's economic plan.

The IMF has said repeatedly in recent weeks that it will only back a program that has "broad political support."

Ahmed said it's important that Egypt moves ahead quickly with a credible economic recovery plan.

"Egypt faces pressing economic challenges and embarking on a program soon would be important to move from the current phase of stabilization to laying the foundation to accelerated economic growth," Ahmed said.

Beyond any money from the IMF, Egypt will also need to raise additional financing from the oil-rich Gulf states and other donors to cover a financing gap which Ahmed estimates at $10 billion-12 billion in the coming 12 to 15 month period.

Egypt's foreign exchange reserves have dropped to $15.1 billion at the end of March, raising speculation that the central bank won't be able to support the Egyptian currency much longer. Some analysts have predicted the currency will be devalued even if quick agreement is reached with the IMF and other external donors.

But Ahmed said that the IMF would not set pre-conditions on the level of the Egyptian pound in any economic program. "It is a program is designed by the Egyptian authorities. I don't think we would have a view on a particular dimension of the economic policy without looking at the full package," Ahmed said.

-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

03-05-12 0352GMT