CAIRO (Reuters) - Egypt has agreed with the International Monetary Fund to delay a $4.8 billion loan that was due to be approved in December after linked economic belt-tightening steps were suspended, the finance minister said on Tuesday.
The deal delay, which will be a blow to the government as it was seen as vital to reassuring investors and donors about the country’s economic plans, followed a move to suspend planned tax increases that were criticized by the opposition.
The IMF board was scheduled to meet to discuss approving the loan on December 19 after a preliminary agreement was reached during a visit by an IMF team to Cairo last month. The IMF had said Egypt must keep policy steady for the loan to go through.
“Of course the delay will have some economic impact but we are discussing necessary measures (to address that) during the coming period,” Finance Minister Mumtaz al-Said told Reuters, after saying the IMF board was now expected to meet in January.
“I am optimistic ... everything will be well, God willing,” he said by telephone.
He said the delay would give officials time to explain an economic reform package after media criticism prompted the government to postpone measures that were part of the program.
Opposition groups, locked in a battle with the government over a constitutional referendum scheduled for Saturday, began attacking the tax increases on social media immediately after they were published in the official gazette at the weekend.
They included increases on the sales tax on goods and services that range from alcoholic beverages, cigarettes and mobile phone calls to automobile licences and quarrying permits.
The taxes are believed to form part of an austerity package included in a program the government has presented to the IMF to secure loan approval, although full details of deal with the Washington-based institution have not been released.
The government has insisted the changes would not target the poor. Speaking in a news conference after the minister’s comments, Prime Minister Hisham Kandil said a “national dialogue” over the tax plans would start next week.
Reporting by Tamim Elyan, Nadia El-Gowely and Edmund Blair; Writing by Edmund Blair; editing by Patrick Graham