Egypt seeks $4.8 billion IMF loan to fix economy

Egypt on Wednesday asked for a $4.8 billion loan from the International Monetary Fund, which stressed the need for a reform programme to deal with the country's economic crisis. The request was made during a visit by IMF managing director Christine Lagarde to Cairo, where she met President Mohamed Morsi and Prime Minister Hisham Qandil. "The loan in general terms is worth 3.2 billion US dollars. We talked about increasing it up to probably 4.8 and maybe more," Qandil told a joint news conference with Lagarde. He said Egypt was seeking a signing by the end of 2012 of a loan agreement based on an interest rate of 1.1 percent and a five-year repayment period following a 39-month grace period. Lagarde said in a statement: "The authorities have indicated that Egypt would like the IMF to support Egypt's economic programme financially to help the country recover and to lay the foundation for strong growth that benefits all." "Getting the country's economy back on track and raising the living standards for all will not be an easy task," she said. "The IMF will accompany Egypt as it undertakes this challenging journey." She also told reporters the IMF had been "very impressed" with the strategy and ambition that Morsi and his prime minister had laid out in their meetings. But Lagarde stressed the two sides had not "gone into details" on the amount or the terms of the loan programme. The loan amount would form "part of a dialogue that we will continue to have." Lagarde said an IMF team would visit Egypt in September to continue working with the Egyptian authorities. The IMF would be a partner to Egypt as it embarks on a journey of economic reform to restore stability, boost investor confidence and create jobs, the organisation's chief said. The fiscal, monetary and structural reforms would require "determination" and "political courage," the IMF chief added. The visit came as Morsi, Egypt's first civilian and Islamist president, moves to consolidate power after his election in June. It follows more than a year of instability since an uprising which toppled his predecessor Hosni Mubarak. State media on Wednesday reported that Morsi is to visit the United States on September 23 to attend the UN General Assembly in New York and hold talks with "senior officials" in Washington, where the IMF has its base. Egypt's economy has been hard hit by the 2011 uprising, a fall in tourism revenues, slump in foreign investment, decline in foreign currency reserves and widening of the budget deficit. Tourism, one of the main sources of revenue and a job provider for 10 percent of the population, is making a recovery but security concerns have kept foreign investors at bay. Meanwhile, central bank reserves have plunged from 36 billion dollars at the start of January 2011 to 14,4 billion dollars, threatening to curtail Egypt's ability to import basic goods such as wheat and refined oil products. Morsi, who rose from the ranks of the Muslim Brotherhood to the presidency, appointed Qandil as prime minister on August 1 and tasked him with improving security and living standards in Egypt.