* Budget revised after national dialogue,
* IMF had offered $3 billion standby facility
* Qatar offered Egypt $500 million, cuts some fuel subsidies
(Adds IMF comments in paragraphs 6-7)
By Edmund Blair
CAIRO, June 25 Egypt will not borrow from the
World Bank and International Monetary Fund after revising its
budget and cutting the forecast deficit, even though a loan had
been agreed, Finance Minister Samir Radwan said on Saturday.
The 2011/12 deficit in the first draft budget was forecast
at 11 percent of gross domestic product, but was revised to 8.6
percent because of a national dialogue and the ruling army
council's concerns about debt levels, the minister told Reuters.
"So we do not need to go at this stage to the Bank and the
Fund," Radwan said, adding that Egypt, which had borrowed from
the IMF under ousted president Hosni Mubarak, still had the
"best relations" with the two U.S.-based institutions.
Despite the budget revisions, the government said it still
expected growth of 3.0-3.5 percent, in line with previous
forecasts, which some economists said could prove optimistic.
Egypt this month agreed on a $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.
An IMF spokesman confirmed on Saturday that Egypt has
scrapped plans for the loan programme.
"In light of these changes, the authorities see no immediate
need for a financial arrangement from the IMF," the spokesman
said, adding: "The IMF continues to maintain a close policy
dialogue with the authorities."
The IMF and World Bank had been among a range of foreign
countries and bodies to offer funds to Egypt to help cover a big
budget shortfall after the economy was plunged into turmoil by
the mass protests that drove Mubarak from office on Feb. 11.
Egypt's cabinet had approved on June 1 a budget for 2011/12
that increased spending by a quarter to create jobs and help the
poor. That was revised and a new draft announced on Wednesday
that included raising income tax and reducing fuel subsidies.
Gulf Arab states are among those who offered support.
Radwan said Qatar had provided $500 million for budgetary
support in the past week. "That is a gift," he said, when asked
if there were any conditions attached to the Qatari cash.
He said Saudi Arabia had earlier offered a similar amount.
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-governmental organisations.
"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 said.
"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 programme is our
programme, so there is no conditionality (from others). It is
just a changed programme."
Asked about whether Egypt might return to the international
markets with a new Eurobond, he said: "I don't rule out
anything. Once the budget is approved, finalised, then I start
looking about the details about the financing."
In the latest budget, the government sees spending up 14.7
percent at 490.6 billion pounds in the 12 months starting in
July, down from an estimate of 514.5 billion pounds given when a
draft budget was shown to the media on June 1.
Radwan said the budget had been reduced in part by raising
income tax from a 20 percent flat rate to 25 percent on firms
and individuals earning more than 10 million pounds. Profits
above that figure would be taxed in the new band.
"I consulted with the business community, and they said they
are willing to pay that. That is why I didn't raise it to more
than 25 percent, because beyond that we would be back to where
we were before (several years ago) when income tax was 40
percent and there was very little tax collection," he said.
Cigarette tax would rise to 50 percent from 40 percent.
"Then we started opening the subsidies file. We are not,
repeat not, touching subsidies on food or butagaz for the poor,"
said, adding fuel subsidies for industries and others would be
Egypt's subsidy bill had been running at about 137 billion
pounds with about 99 billion pounds of that spent on fuel
subsidies, he said without specifying the period. He said the
fuel subsidy bill would now be reduced by 7.5 billion pounds.
In a bid to help industry cope with the change, he said the
government would help brick-making factories switch from diesel
to natural gas and would then remove the fuel subsidy.
Extra revenue would also come from revising gas export
prices, he said adding that such revisions had already been
agreed with Jordan and Spain. Egypt also exports to Israel.
He said the military council had to approve the new draft
budget, but did not foresee any hitch.
(Additional reporting by Lesley Wroughton in Washington;
editing by Mark Heinrich)
(Created by Michael Roddy)