Egypt reform plan targets recovery in forex reserves

The revised programme is vital for resuming negotiations with the International Monetary Fund on a $4.8 billion loan to keep the Egyptian economy afloat.

Egypt reform plan targets recovery in forex reserves

World Bulletin/News Desk


Egypt is aiming for a recovery in its foreign exchange reserves which have plunged since the 2011 revolution but faces a huge budget deficit, according to a revised government economic reform programme seen by Reuters on Monday.

The revised programme is vital for resuming negotiations with the International Monetary Fund on a $4.8 billion loan to keep the Egyptian economy afloat.

Cairo and the IMF agreed in principle last November on the loan, based on an earlier version of the reform programme, but talks were suspended in December at Egypt's behest due to street violence.

The latest programme targets foreign currency reserves of $19 billion by the end of June, climbing to $22.5 billion a year later, according to a copy of the plan seen by Reuters.

Reserves have tumbled to $13.6 billon in January from $36 billion before the overthrow of president Hosni Mubarak in February 2011, and the Egyptian pound has fallen 8.2 percent since the central bank began auctioning dollars at the end of December.

Economists expressed caution about the figures, and whether Egypt could secure IMF help by the end of the financial year in June. "They had their targets before and they didn't reach them," said Mona Mansour, chief economist at CI Capital.

"Maybe they are targeting to have the IMF programme by then, but I think it will be difficult. Other than that, they may have an agreement with regional countries," she said.

Egypt has secured some funding from Qatar in recent months but this has not halted the fall in reserves or the drop in the Egyptian pound.

Any IMF deal would involve unpopular austerity measures just as Egyptians vote in four-stage parliamentary elections due to be held from April until late June.

However, the programme confirmed the dire state of government finances. It targets a budget deficit for this financial year of 189.7 billion Egyptian pounds ($28 billion), or a huge 10.9 percent of total economic output.

Even this assumes economic reforms are made and the deficit would hit 12.3 percent of GDP without such action, it forecast.

Last Mod: 25 Şubat 2013, 14:48
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