New Egyptian government begs IMF for $4.8 billion USD loan?

InformAfrica – It is unbelievable that a country like Egypt is seeking a $4.8 billion USD loan from the IMF to help cover the country’s budget deficits and/or avoid currency devaluation. Can the new Egyptian government be trusted?

Egypt seeks loan from IMF

The Egyptian government formally requested a $4.8 billion loan from the International Monetary Fund (IMF) yesterday.

Egypt requested from the International Monetary Fund (IMF) Wednesday a loan of 4.8 billion U.S. dollars during a meeting between President Mohamed Morsi and IMF chief Christine Lagarde.

“We discussed many details about the loan, including the interest that will be 1.1 percent, and we required raising the loan from 3.2 to 4.8 billion U.S. dollars,” Prime Minister Hesham Qandil said after the meeting, adding the loan will be on five years with 39 months’ grace period.

“The IMF experts will review the economic and social program of the Egyptian government,” he added.

The prime minister also said talks will be held Thursday on other details, predicting the signing ceremony to take place in early December or November.

For her part, Lagarde said the IMF admired the economic and social strategies of Egypt, affirming the IMF’s keenness on supporting Egypt to achieve its stability and improve its security to encourage foreign investments.

“The accurate details about the loan haven’t been discussed yet, but I think all the loan procedures may be finished within two months,” Lagarde said.

The loan is urgently-needed to cover the budget deficits after Egypt’s foreign reserves fell to about half of the level at the end of the Mubarak era.

The government is also facing a balance of payments crisis and high borrowing costs, and the IMF loan would help avoid the currency devaluation.

The Gross Domestic Product (GDP) in Egypt is worth about 229.5 billion US dollars in 2011, according to a report published by the World Bank. The GDP value of Egypt is roughly equivalent to 0.35 percent of the world economy.

Historically, from 1960 until 2010, Egypt GDP averaged 47.3 billion reaching an all time high of 218.9 billion in December of 2010 and a record low of 4.0 billion in December of 1962. The gross domestic product (GDP) measures of national income and output for a given country’s economy.

According to Al Jazeera, protesters see the proposed loan as only of benefit to “business men” and as a continuation of the IMF privatisation carried out under Mubarak.

Additionally, in January of 2011, Al Jazeera reported Egypt’s decline of loans from both the IMF and the World Bank after Qatar and Saudi Arabia gave the country large cash gifts – $500m in Qatar’s case – as a gesture of budgetary support. Any loans from IMF or the World Bank hardly does any good for any African nation, but rather cripples the economy further. IMF or the World Bank are not the solution to Africa’s problem.

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