May 30, 2011 / 11:31 AM / 8 years ago

Egypt says it agrees $3 billion IMF loan

CAIRO (Reuters) - Finance Minister Samir Radwan said on Monday that Egypt has agreed in principle on a $3 billion, 12-month loan from the International Monetary Fund (IMF) that he hoped would be signed by Sunday.

Egypt's Finance Minister Samir Radwan speaks to the media as the Egyptian stock exchange celebrates its reopening, in Cairo March 23, 2011. REUTERS/Mohamed Abd El-Ghany

He told Reuters that the loan would help Egypt fill a budget deficit for the financial year ending in June 2012 that he estimated would be 11.3 percent of gross domestic product, up from the 7.9 percent that had been forecast before the uprising.

Cairo has been asking international donors and lenders for funding help after protests that ended President Hosni Mubarak’s 30-year rule scared away tourists and investors, two of its main sources of foreign exchange.

The crisis has cut into the government’s revenue from taxes at a time of increasing demands on expenditure, which include calls for higher wages from state employees and pressure to raise subsidies on basic commodities.

“It can be signed any minute between now and Sunday,” when an IMF delegation now negotiating the agreement is scheduled to finish a visit to Egypt, Radwan told Reuters by telephone.

Egypt planned to borrow from abroad to help finance the budget deficit, he said: “Bonds, donations from countries, from the U.S., from the World Bank.”

SOFTER TERMS

Diplomats say the interim Egyptian government does not have the mandate to make major fiscal reforms and Radwan confirmed that the IMF had softened its usual strict terms.

“We have the usual metrics with benchmarks. You have to reduce the deficit by such and such time. This should not exceed that,” he said, adding that the IMF deal would contain “no conditionality of the traditional kind.”

He did not give further details.

The diplomats say an IMF agreement could provide a framework for support from other donors and that the European Union would consider providing several hundred million euros of its own aid once an IMF agreement was signed.

Over the last 10 days the World Bank, Saudi Arabia, Qatar, the United States and others have pledged billions of dollars in various forms of aid, including direct support for the budget and other funds to narrow a widening balance of payments gap.

The balance of payments swung to a deficit of $5.50 billion in the nine months to the end of March from a surplus of $3.11 billion a year earlier, the central bank said on Monday.

Radwan said Egypt had told the IMF the payments deficit will burgeon to $2 billion in the April-June quarter and $10 billion in the 2011/12 fiscal year.

Editing by Susan Fenton

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