Cairo: The International Monetary Fund confirmed on Thursday it was sending a mission to Egypt to discuss possible financial aid to the country, even as analysts cautioned that the potential lifeline may not be enough to stem serious economic worries that materialised following former President Hosni Mubarak's ouster.
Egypt turned down a $ 3 billion IMF load in June, when officials argued that they did not want to saddle a new, post-Mubarak civilian government with additional debt.
In the aftermath of the popular uprising that toppled Mubarak with ongoing political unrest and instability, the country's economic situation has deteriorated sharply over the past year, with net international reserves falling by 50 per cent and tourism and foreign investment hammered.
With the yields it is forced to pay on bonds climbing, and its sovereign rating repeatedly downgraded by the three major international ratings agencies, Egypt is scrambling to find funds to cover budget shortfalls as it looks to satisfy an increasingly angry population.
The mission from the international organisation will be in Cairo next week to "initiate discussions for possible IMF support" that would serve as the "first step" in the process leading to possible financial assistance, IMF spokesman Gerry Rice said in Washington.
Analysts question whether the funds, if offered and accepted, would be enough to help overcome a financial crunch that is being amplified by depreciation pressures on the Egyptian pound and investor unease with the course of the country's political transition.
"The proposed $ 3 billion facility would help plug a gaping hole in the budget. But it would not be sufficient to stabilise the country's growing external payments imbalance," London-based Capital Economics said in a research note. "A currency devaluation still seems likely."
Egyptian officials have stressed they want to keep the projected budget deficit at 8.6 per cent of the gross domestic product - a target economists have said may not be attainable given the ongoing instability and the need to fund a slew of social projects and meet promised pay hikes in the public sector.
Capital Economics said that over $ 62 billion of Egypt's debt is due to mature this year, equal to roughly 30 per cent of GDP.
"Even if the government is able to finance most of it domestically, it is likely that this would come at a higher cost," said the report. In addition, "Egypt's spending commitments on fuel and food subsidies and public sector salaries are difficult to scale back if the government needs to tighten its belt."
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