Egypt will not borrow from the World Bank and IMF after revising its budget and cutting a forecast deficit, even though a loan had been agreed, Egyptian Finance Minister Samir Radwan said yesterday.
Although the deficit for this year to next year was forecast at 11 percent of GDP in the first draft budget, that was revised down to 8.6 percent following a national dialogue and the ruling army council’s concerns about debt levels, the minister said.
“So we do not need to go at this stage to the Bank and the Fund,” Radwan said, adding that Egypt, which borrowed from the IMF under ousted Egyptian president Hosni Mubarak, still had the “best relations” with the two US-based institutions.
Egypt this month agreed on a US$3 billion, 12-month standby loan facility from the IMF, which Cairo had said came with more lenient terms than usually associated with such lending.
The IMF and World Bank had been among a range of foreign countries and bodies to offer funds to Egypt to help cover a large budget shortfall after the economy was plunged into turmoil by the mass protests that drove Mubarak from office on Feb. 11.
The Egyptian Cabinet approved on June 1 a budget for this year and next year that increased spending by a quarter to create jobs and help the poor.
Gulf Arab states, such as Qatar and Saudi Arabia, are also among those who have offered support.
Radwan said Qatar had -provided US$500 million in budgetary support in the past week.
The minister said the first draft of the budget, which forecast a deficit of about 170 billion Egyptian pounds, was discussed with activists, writers, the business community, trade unions and non-government organizations.
“As a result of this dialogue and given the concern of the military council not to have huge debts for the government that comes after the election, the deficit was reduced to 134 billion pounds, equivalent to 8.6 percent of GDP,” Radwan said.
“The result is we didn’t need outside finance. We are covering the largest part from local sources and we are waiting for outside support to come in,” he added.
“If we had gone with the other package, we would have needed to go [to the IMF],” the minister said, adding the new budget would not go back on a commitment to social justice.
Protesters who rallied against Mubarak demanded political freedoms and an end to what they saw as a system of rule from which a rich elite benefited at the expense of the poor.
On the budget plans, Radwan said: “The program is our program, so there is no conditionality [from others]. It is just a changed program.”
In the latest budget, the government sees spending up 14.7 percent at 490.6 billion pounds over the 12 months starting next month, down from an estimate of 514.5 billion pounds when the draft budget was shown to the media on June 1.
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