* IMF due to resume talks on $4.8 bln loan request on Weds
* Govt hopes for deal in April, IMF gives no timeline
* Hike in cooking gas prices triggers protest
* Moussa, Abolghar both say Egypt needs the loan
By Tom Perry and Maggie Fick
CAIRO, April 2 Egypt predicts a speedy
conclusion to talks with the International Monetary Fund on a
$4.8 billion loan that will help save its economy from crisis.
It may not be that easy.
In talks due to start on Wednesday, Cairo must convince the
IMF that it is serious about reforms aimed at boosting growth
and curbing an unaffordable budget deficit. That implies tax
hikes and politically risky cuts in the generous system of state
subsidies for fuel and bread.
"The IMF is in for a tough visit," said Angus Blair,
chairman of Signet Institute, a think tank for the MENA region.
"There is going to be a lot more pressure on Egypt to come
out with a positive economic plan, to try to construct a
plan which would build domestic confidence, investment and
economic growth," he said.
The government hopes to have an agreement finalised by the
IMF's Spring meetings, held from April 16 to 21, Finance
Minister Al-Mursi Al-Sayed Hegazy said on Monday. IMF officials
have not given a timeline.
The stakes are high for the Muslim Brotherhood-led
administration: Foreign currency reserves are at a critically
low level that cover less than three months of imports, and the
local currency has lost a tenth of its value since the start of
Seeking to protect the Egyptian pound, which is trading even
lower on the black market, the central bank has lifted interest
rates, increasing the cost of borrowing needed to finance a
state deficit that will hit 12.3 percent of GDP without reforms.
The financial crunch has forced the government to cut back
on fuel imports, leading to shortages that have caused transport
disruptions and power cuts. To ease the shortages Cairo has said
it aims to import oil from Iraq and neighbouring Libya while
paying off some of the money it owes to foreign energy firms.
Egypt has also cut back on wheat imports, running down grain
reserves in the hope a bumper harvest will be enough to feed the
country of 84 million people. Egypt is the world's biggest wheat
Without a deal, Egypt could still limp along for several
more months, but it would not be comfortable.
As the weaker pound drives up inflation, shortages threaten
to exacerbate tension in the street, where Mursi's opponents
have been airing their political grievances in protests that
routinely turn violent.
Pointing to the scope for more trouble, sellers of
subsidised cooking gas protested outside the supplies ministry
on Tuesday over a hike in the prices of bottled gas announced by
the government on Monday - a move they linked to the IMF talks.
"It is impossible for us to handle this price rise," said
Fahmy Ahmed, 39, one of a hundred protesters who complained the
price rise would eat into the margin they make by selling the
subsidized gas on to consumers at a mark-up.
BLAMING THE IMF
The IMF deal has already fallen victim to political pressure
once. Egypt initialled a deal with the Fund in November, only to
postpone ratification a few weeks later in the face of protests
ignited by political conflict between Mursi and his opponents.
Some of Mursi's opponents are keenly aware of the need for a
deal. "The importance is not the amount of money but the message
it sends that the Egyptian economy will be helped," said Amr
Moussa, who ran for the presidency last year.
The postponement of parliamentary elections until later this
year gives the government more political breathing room to reach
a deal: Mursi has said the polls could now get under way in
October instead of the original start date of late April.
But it also means the IMF will be talking to a government
likely to be overhauled by the end of the year, a factor likely
to complicate the negotiations. "At this stage, it is impossible
to tell how quickly a deal will be signed," said Anthony Simond,
investment analyst at the UK-based Aberdeen Asset Management.
"In an ideal world, an IMF programme would be in place for
the start of the next fiscal year beginning in July, but given
the delays that we've seen over the last couple of years and the
current political climate, whether that is achievable is up to
debate," he said.
The IMF has stressed in the past that it wanted broad
political consensus on an agreement. After cancelling last
year's deal, the government launched a "social dialogue" it
billed as an attempt to address citizens' concerns.
The result was amendments to the reform plan drawn up last
year. Speaking last month, a senior U.S. diplomat said the IMF
had found the government's latest proposals unsatisfactory.
Lawmakers in the Muslim Brotherhood-led upper house of
parliament were debating amendments to tax laws on Tuesday, said
Essam el-Erian, deputy head of the Brotherhood's political
party, pointing to last-minute changes ahead of the IMF visit.
Mohamed Abolghar, head of the Egyptian Social Democratic
Party, complained that the government had failed to consult the
opposition on anything. He added: "We strongly believe that we
need this loan but certain changes in the economy must be made."