Egypt's Options Narrow To IMF, Qatar As Money Runs Out | oAnth's day by day interests - via its contacts |

Egypt seems to realise the money has nearly run out and it must turn to the IMF or a willing friend in the Gulf, where it now has just one, Qatar.

After months of delays, the Islamist government has produced a new plan to reverse a slide in its foreign currency reserves and tackle a budget deficit that could overwhelm a stable wealthy nation, let alone a country riven by political conflict.

This plan relies on someone else stumping up to keep the Arab world's most populous nation afloat. Any hope that the government can hold out until after parliamentary elections due to finish in June and delay highly unpopular cuts seems slim, with signs of extreme economic stress all around.

That narrows Cairo's immediate options to the International Monetary Fund, which will demand the kind of austerity measures that could provoke yet more street violence in the middle of an election campaign.


The other option is Qatar, the only wealthy Gulf nation truly sympathetic to the Muslim Brotherhood government. Doha has already provided help but in amounts that have failed to prevent Egypt's currency reserves from falling worryingly low.

"The authorities have little margin of manoeuvre left without fresh capital flows into the Egyptian economy," said Alia Moubayed, an economist at Barclays.


Above all, economists believe, Egypt needs a political consensus on reforms to stabilise its finances. However, this seems a forlorn hope as the Islamists of President Mohamed Mursi struggle with the liberal and leftist opposition over the future character of Egypt following the 2011 revolution.(...)



Since then the problems have piled up. The central bank, which spent $20 billion trying to defend the Egyptian pound during and after the uprising that overthrew Hosni Mubarak, accepted the inevitable. In late December, it began regular dollar auctions, allowing the pound to fall more than eight percent under the new system and taking its total loss since the revolution to 14 percent.

Defending the pound helped to curb a rise in the price of imported goods on which even the poorest Egyptians often depend, but it has been enormously costly for the state.  (..)



Investment Minister Saleh professes optimism that the nation will rally behind the programme of austerity and reform that is bound to be the price of an IMF deal. "We don't see any reasons why the Egyptian people should reject the programme. They will eventually realise that the benefits they will get will outweigh the load they will carry," he told investors in Dubai on Monday.

Few analysts and economists share his optimism. Even after the parliamentary elections - which will drag on from April to June in four stages - radical change seems remote. (...)


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