Egypt’s government has been reluctant to share details of a reform plan it has drawn up with the International Monetary Fund, making it hard for parliament to support any accord, the Muslim Brotherhood’s party and the IMF said on Monday.
The IMF says that before it agrees to a $3.2 billion loan Egypt needs to prevent a fiscal crisis, the government must first sell the plan to the country's political forces, especially the Brotherhood's Freedom and Justice Party (FJP), which won nearly half the seats in the new parliament.
The reform plan contains a series of austerity measures and new taxes, according to a draft obtained by Reuters, steps that are certain to be unpopular in a country hammered by a year of economic hardship after its popular uprising.
“We do not find there is enough detail available for us to determine what the real financial circumstances are of the budget and the government,” Ahmed Alnaggar, a member of the FJP’s economic committee, told Reuters after a meeting with the IMF on Monday.
“Therefore the FJP can neither agree to nor reject the loan unless the government gives us the necessary details to study and then decide.”
Egypt formally requested the 18-month IMF financing package earlier this year and the government has said it hoped to seal an agreement this month. But the IMF says a signing is several weeks away at least.
“Our technical team, if all goes well, will be here for the next couple of weeks,” IMF regional director Ahmed Masood told Reuters after talks with FJP members. “This process will take a few weeks rather than something we will resolve in days.”
The FJP has said it supports Egypt’s request for an IMF loan but first wants the government to produce a coherent plan to battle corruption and get costs under control.
Egypt has spent more than $20 billion in foreign reserves since last year's uprising to prop up its currency. Reserves now stand at a worryingly low $15.7 billion, including $4 billion in gold bullion the government would be reluctant to draw down.
The IMF has asked Egypt to draw up an economic reform plan with benchmarks and targets and line up pledges of financing from other major donors. The government says it needs a total of $11 billion to avert a balance of payments crisis.
Analysts say the FJP is reluctant to endorse austerity measures that any government it is likely to form in a few months would have to implement.
Masood said the FJP, like others, wanted to discuss specifics before endorsing the measures in the IMF agreement.
“So that is what the work is in the coming weeks,” Masood said. “The next few days and weeks will be the time to go over those measures in more detail,” he said.
“The important thing now is to make sure that we have an opportunity to go over all the specific questions that people have so that they can support the program knowing fully well what's entailed in it in the next phase.”
According to the few details released by the government, the reform plan contains an increase in the prices that heavy industries must pay for their energy, and the expansion of Egypt's current sales tax into a fully-fledged value-added tax.
The draft reform plan, drawn up in December but not released publicly, contains 25 urgent measures to reduce Egypt’s budget deficit, which the government has put at 144 billion Egyptian pounds ($23.9 billion) in the fiscal year that ends this June.
“The government has promised a detailed program, but what we received instead was general data without any details on how the loan will be spent and the means by which the loan will be repaid,” Alnaggar said.
“The IMF stressed the necessity of getting support from the main political parties and the FJP so that the loan (bill) is passed in parliament.” ($1 = 6.0342 Egyptian pounds)