* Says IMF instalments should be backloaded
* Suggests reducing initial payout to $500 mln
* Govt had been hoping for initial accord within weeks
By Patrick Werr and Marwa Awad
CAIRO, April 8 (Reuters) – Egypt’s Muslim Brotherhood has
warned the government it will not support an IMF loan unless the
terms are changed or it moves aside and allows a new
administration to oversee how the funds are spent, its candidate
for president said on Sunday.
The government has been negotiating a $3.2 billion loan with
the International Monetary Fund (IMF) to help it avert a balance
of payments crisis caused by the political and economic turmoil
of the last year, and an IMF technical team is now in Cairo.
The IMF has said that before it agrees to a loan, the
government must first sell the plan to the country’s political
groupings, especially the Muslim Brotherhood’s Freedom and
Justice Party, which won nearly half the seats in the new
parliament.
“We told them (the government), you have two choices. Either
postpone this issue of borrowing and come up with any other way
of dealing with it without our approval, or speed up the
formation of a government,” Khairat al-Shater said in an
interview.
He said he realised the country’s finances were precarious
and a severe crunch could come by early to mid-May as the end of
the fiscal year approached, but that this was the government’s
problem to resolve. Egypt’s fiscal year runs to June 30.
“It is not logical that I approve a loan that the
transitional government would take for two or three months, then
demand that I, as a permanent government, repay,” he told
Reuters.
The government has been financing much of its fiscal deficit
by borrowing from domestic banks, which are reaching the limits
of their ability to lend.
“I have to agree to a loan, somebody else gets to spend it,
then I have to pay it back? That is unjust.”
The Brotherhood could also accept a loan if the size of the
initial disbursement were reduced so that most of the funds were
paid out after the completion of a presidential election in
June, when a new government is scheduled to take power, Shater
said.
“We are not opposed in principle. We are opposed to the
timing and the method of implementation,” he said.
“If it were $500 million instead of a billion and a bit, and
there was a clear plan on how it would be spent, we might take
another look at it,” Shater said.
FOREIGN RESERVES
Planning Minister Faiza Abu El-Naga said on April 2 that she
expected the government to sign a memorandum of understanding
with the IMF within a few weeks and seal a final agreement by
June, when half of the loan would be disbursed.
Egypt has spent more than $20 billion in foreign reserves
since last year’s uprising to prop up its currency, limiting its
slide to only 3.65 percent against the dollar since January 2011
despite the loss of some of the country’s main sources of
foreign exchange.
Egypt’s reserves fell another $600 million in March to
$15.12 billion. This is equivalent to less than three months
worth of imports and includes $4 billion in gold bullion the
government would be reluctant to draw down, economists say.
Shater, a businessman, said he strongly supported a market
economy. He added that a lack of government resources would
force Egypt to rely almost exclusively on private investment to
build infrastructure over the coming two to three years.
The formation of a permanent coalition government would
benefit Egypt in this regard as well, Shater said.
“When we met with lots of investors around the world, all of
them said they would not begin investing until there was a
permanent government or presidential elections. But in this
current situation, nobody wants to enter the country,” he said.
(Additional reporting by Yasmine Saleh and Abdelrahman Youssef;
Editing by Giles Elgood)
