July 17, 2013 / 4:56 PM / 5 years ago

UPDATE 1-Egypt finance minister says IMF loan is "part of the solution"

CAIRO, July 17 (Reuters) - Egypt’s newly appointed finance minister said on Wednesday that an IMF loan was only “part of the solution” to the country’s problems and the new transitional government would have to draw up a plan that would start to fix the troubled economy.

Egypt’s previous government had been negotiating a $4.8 billion loan from the International Monetary Fund to help it get the country’s deteriorating finances under control, but had baulked at taking unpopular austerity measures.

“We need time to read and study the issues and files on the ground to come up with sound and well thought out decisions that will pave the way and build the future for governments to come,”

Ahmed Galal said in a statement released by the ministry.

Galal was sworn in on Tuesday as part of an interim government appointed after the army removed Islamist President Mohamed Mursi from power on July 3.

It was important to manage public spending to bring the growing public debt and budget deficit under control. “This is a reason for rising prices and the wave of inflation, which increases the burden on citizens,” he said.

Egypt’s budget deficit mushroomed in the first five months of 2013 as government labour costs and interest expenses rose while tax revenue remained weak. Some economists estimate the deficit over the last 12 months was equivalent to 15 percent of gross domestic product.

It was important to avoid undesirable deflationary policies with their negative effects on the labor market, Galal said.

His main objectives would be, “fiscal discipline, macroeconomic balance, stimulating the economy to create jobs and achieve social justice, and efforts to have the fruits of growth reach all segments of society, especialy those with low incomes.”

He had asked finance ministry officials to prepare proposals and innovative solutions to increase state revenue, manage spending and find new forms of financing to reduce the burden of financing state debt, he said.

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