The parliamentary majority’s refusal of the cabinet’s February briefing to Parliament has raised concerns of economists and bankers over the possible faltering of government negotiations of an International Monetary Fund loan.
The IMF had stressed the need of obtaining government guarantees that the economic reform programs drafted by Prime Minister Kamal al-Ganzouri’s cabinet would be implemented, to secure the US$3.2 billion loan.
People’s Assembly Budget and Planning Committee member Ashraf Badr Eddin said the Ganzouri cabinet “lost its legitimacy” after the majority of Parliament rejected its statement.
Badr Eddin said the withdrawal of confidence in the cabinet would negatively affect the ongoing loan negotiations with the IMF.
He said Parliament’s approval of the loan depends on its approval of the economic reform plan, how the loan will be spent, and whether or not it would go to investment projects.
Al Baraka Bank consultant Bassant Fahmy said she preferred for the loan negotiations to be postponed until after the presidential election.
She said she wondered why the cabinet was insisting on receiving the loan even though “it has many local alternatives for financial resources instead of external borrowing.”
Fahmy said these alternatives include the reduction of public spending and disclosure of the exact amount of money found in special funds, collection of late taxes from businessmen, reviewing energy subsidies for high energy consuming factories, and reducing the number of ministries in Egypt.
Finance Minister Momtaz al-Saeed had previously said he expected the disbursement of the first loan installment in May.
But Mohamed Gouda, a member of the Freedom and Justice Party’s economic committee, said that while the cabinet has the right to make the initial agreement to the loan, its implementation depends on ratification by Parliament.
Meanwhile, Misr Iran Development Bank Chairman Ismail Hassan said Parliament’s rejection of the cabinet statement does not mean the IMF loan negotiations have failed.
Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said the IMF must receive guarantees that the next government will support the economic reform program, continue its implementation and ensure its continuation.
Ahmed said the IMF is ready to conclude the loan agreement as soon as Egypt’s government receives the approval of society and political factions on the program, “whether that takes a week or months or more.”
He said this was especially because the implementation of the loan would be the responsibility of the next cabinet, rather than Ganzouri’s.
