A vital $4.8 billion International Monetary Fund loan to Egypt will be delayed until next month, its finance minister said on Tuesday, intensifying the political crisis gripping the Arab world’s most populous nation.
As rival factions gathered in Cairo for a new round of demonstrations, Finance Minister Mumtaz al-Said said the delay in the loan agreement was intended to allow time to explain a heavily criticized package of economic austerity measures to the Egyptian people.
The announcement came after President Mohamed Morsi on Monday backed down on planned tax increases, seen as vital for the loan to go ahead, within hours of their being announced. Opposition groups had greeted the tax package, which included duties on alcoholic drinks, cigarettes and a range of goods and services, with furious criticism.
“Of course the delay will have some economic impact, but we are discussing necessary measures (to address that) during the coming period,” the minister told Reuters, adding: “I am optimistic … everything will be well, God willing.”
Prime Minister Hisham Kandil added: “The challenges are economic not political and must be dealt with aside from politics.”
“The delay is alarming given Egypt’s current economic woes and means that political uncertainty could lead to further delays,” Mona Mansour, chief economist at Cairo-based investment bank CI Capital Holdings, said by phone. “This will add further pressure on reserves and further depreciation of the Egyptian pound is expected.”
The pound, subject to a managed float, retreated 0.1 percent to 6.1529 per dollar at the close in Cairo, bringing its loss since Nov. 22 to 1 percent. That matches its loss for the year to that date.
On the streets of the capital, tensions ran high after nine people were hurt when gunmen fired at protesters camping in Tahrir Square, according to witnesses and Egyptian media.
The opposition has called for a major demonstration it hopes will force Morsi to postpone a referendum on a new constitution.
Supporters of the Islamist leader, who want the vote to go ahead as planned on Saturday, gathered in the capital, setting the stage for further street confrontations in a crisis that has divided the nation of 83 million.
The upheaval following the fall of Hosni Mubarak last year is causing concern in the West, in particular the United States, which has given Cairo billions of dollars in military and other aid since Egypt made peace with Israel in 1979.
The turmoil has also placed a big strain on the economy, sending foreign currency reserves down to about $15 billion, less than half what they were before the revolt two years ago.
Reuters
Reuters
