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IMF leaves Egypt as pound declines, but vows to return for more talks

Loan talks have come amid a declining Egyptian pound, lackluster foreign investment and a growing budget deficit in the Middle Eastern country.

IMF egypt backEnlarge
The International Monetary Fund said it will return to Egypt within two or three weeks to help deal with the ailing economy. (AFP/AFP/Getty Images)

CAIRO, Egypt — The International Monetary Fund said it will be returning to Egypt in several weeks to hash out deals for a major loan to bolster the ailing economy.

The loan talks have come amid a declining Egyptian pound, lackluster foreign investment and a growing budget deficit in the Middle Eastern country.

Egypt has already signed a preliminary accord for the loan of $4.8 billion in November.

The loan negotiations were put off last month due to demonstrations and riots in the country over the constitution, said Reuters.

IMF Middle East and Central Asia Director Masood Ahmed met with Egypt's Mohamed Morsi on Monday.

After the meeting, he released a statement reaffirming the international organization's commitment to Egypt.

“The IMF remains committed to support Egypt in addressing its increasing economic challenges and moving to a more inclusive model of economic growth through a socially-balanced homegrown program," the statement read.

Yet the fact that the Fund's delegation left Cairo Tuesday without a final deal does not bode well for Egypt's government, says GlobalPost's correspondent in Egypt, Erin Cunningham. She points to the country's dire need of fresh cash to revive its flagging economy, including a growing budget deficit and tumbling foreign reserves.

The crisis has become more acute in recent weeks after the Egyptian pound plummeted against the dollar, and Morsi’s government needs the loan to assure other international donors it has a sound plan for economic stability.

But it's complicated.

"Accepting loans from the IMF is an unpopular move among Egyptians, many of whom lived through the austerity measures here in the 1990s and are worried about food and energy subsidies that shield them from absolute poverty," Cunningham explains.

But according to Farah Halime, Cairo-based business journalist and creator of “Rebel Economy," a site dedicated to covering how Arab Spring economies rebuild, reforming the country’s mammoth energy subsidies regime would free up funds for other government programs.

“The IMF loan is the cheapest option available for Egypt to recover from its extremely precarious economic position,” Halime writes.

Follow Erin Cunningham @erinmcunningham, who contributed reporting from Cairo.
 

http://www.globalpost.com/dispatch/news/regions/middle-east/egypt/130108/imf-be-back-egypt-weeks-pound-declines