IMF Says It is Still Ready to Help Egypt
A top International Monetary Fund official said Thursday that the crisis lender is still ready to support Egypt after Cairo withdrew its $3 billion loan request last week.
Ratna Sahay, the Fund's deputy Middle East director, rejected accusations that the planned facility had politically tough secret conditions to force privatizations and end subsidies.
But she urged the end of subsidies which "benefit the rich more than the poor."
"The IMF continues to maintain a close policy dialogue with the authorities and remains committed to helping Egypt and its people through technical assistance and policy advice," she said in an interview published in the Fund's online magazine IMF Survey.
Sahay said the IMF's assistance would have helped the government increase wages for the lowest-paid government workers and expand job-creating programs.
"It would have supported plans to increase investment in the education, health, and low income housing, which would in turn have helped the Egyptian economy to recover faster," she said.
She denied there were any secret conditions in the program.
"Nothing was hidden or kept quiet," she said.
"The IMF arrangement included a number of benchmarks, which consisted of measures that were already in the government's economic plan, none of them related to privatization or requiring changes to the subsidy regime during the period of (the) IMF arrangement.
"In fact, we fully agreed with the authorities' objective of promoting social justice and increasing transparency during this historical transition."
Last week Egypt said it was canceling its request for a loan.
"We have decided not to have recourse to loans from the international financial institutions," said Abdelfattah al-Gebali, an advisor to Finance Minister Samir Radwan.
He said the decision was taken in response to the "pressure of public opinion," which has been largely hostile to the loan request, and after the submission of a new draft budget for 2011-2012 that foresees a reduction in public spending.
While Sahay stressed the IMF had not diverged from the government's own goals, she said the country would do well to eliminate some subsidies.
"It is important to note that generalized subsidies in Egypt are very large, wasteful, and often benefit the rich more than the poor."
"Any reforms, of course, would require careful consideration and preparation; in particular, it would be essential to ensure that the poor are protected through a better targeting system, while the subsidies benefitting the rich are eliminated."
She urged the country to avail itself of IMF support.
"Generally speaking, if the authorities anticipate that there might be a need to borrow externally, it is always better for any country to request an IMF arrangement at an early stage when economic challenges are less daunting."