IMF to lend Egypt $3 bn: ministry

The International Monetary Fund has granted Egypt a loan of three billion dollars over 12 months to help put its economy back on track, Finance Minister Samir Radwan announced on Sunday. "Egypt announces the end of negotiations with the IMF and the clinching of an agreement with the fund to relaunch the Egyptian economy," Radwan told reporters. The two parties agreed to a "three-billion-dollar loan over 12 months... with an interest rate of 1.5 percent," he said, adding that the loan would help partly offset a budget deficit of $28 billion. The loan grants Egypt a grace period of three years and three months followed by five years to pay it back. "We are committed to support Egypt and we are conscious of the pressures on state resources, particularly with regards to money transfers from overseas workers and tourism," said Ratna Sahay, deputy director of the fund's Middle East and Central Asia department. The Egyptian economy, which depends in large part on tourism, has seen a dramatic drop in tourist arrivals and near zero economic growth during and after the revolt that ousted former president Hosni Mubarak in February. Tens of thousands of Egyptian workers in Libya, who used to send money back to their families in Egypt, also had to flee the conflict in the neighbouring north African nation. The IMF said on May 12 it had received a loan request from Egypt. Egypt, which estimates it needs between 10 and 12 billion dollars in international funding to keep it going until mid-2012, was courting loans worth roughly $6 billion from the IMF and the World Bank. Cairo has said two Gulf countries would also help boost Egypt's economy. Saudi Arabia has pledged four billion dollars in aid in the form of long-term loans and grants, while Qatar pledged to invest $10 billion, according to Egyptian authorities. "The agreement between Egypt and the IMF is very positive. Egypt obtained the loans it needs to finance its budget deficit under very generous terms, particularly the grace period and interest rate," said Mahmud Abdel Fadil, economy professor at Cairo University. The IMF said in a report to the leaders of the G8 meeting in France last month that it was prepared to lend about $35 billion to oil-importing countries in the Middle East and North Africa. "Our agreement with Egypt is a further step toward providing this aid," said John Lipsky, the IMF's acting managing director. In a statement on Sunday, Lipsky welcomed Egypt's commitment "to lasting change and structural reform." "We are optimistic that the programme's objectives of promoting social justice, fostering recovery, and maintaining macroeconomic stability and generating jobs will bring positive results for the Egyptian people," he said. On Thursday, the IMF welcomed the Egyptian cabinet's approval of the 2011/2012 draft budget. "The measures go in the right direction of supporting economic recovery, generating jobs and assisting low income households, while maintaining macroeconomic stability." "We share the draft budget's overarching goal aimed at promoting social justice," read its statement. Radwan on Wednesday announced the lifting of the minimum monthly wage to 700 pounds (117.8 dollars) in the country where regime-changing protests were partly fuelled by economic woes earlier in the year. He pledged the pay rate would "be gradually raised to 1,200 pounds within five years." The new minimum wage is still considered a pittance as inflation hovers at around 12 percent and unemployment at 11.9 percent in the country of 80 million. Tourism has already recorded 2.2 billion dollars in losses since the revolt began in January and unrest has cost the treasury more than one billion dollars, officials say.