No IMF Deal In 2013
BMI View : A combination of financial assistance from Gulf States and a lack of political resolve will ensure that the Egyptian go vernment does not complete nego ti a tions with the IMF this year. Whilst this may be positive for the short - term political stability of the country, it does not bode well for the longer term economic outlook.
We do not expect the US$4.8bn Stand-By Arrangement between the IMF and the Egyptian government to be concluded in 2013. Negotiations have been ongoing for the past two years, but now looked to have stalled. The agreement is key to unblocking a wider package of financial assistance from a range of external donors which totals approximately US$14.5bn.
Political will for concluding, or even continuing, negotiations with the IMF has substantially reduced following financial assistance from the Gulf over the past two weeks. Since the overthrow of the Muslim Brotherhood, Saudi Arabia, UAE and Kuwait have pledged a total of US$12bn in assistance. This has relieved the pressure on foreign reserves, which reached US$14.9bn at the end of June - coverin g just three months of imports. Therefore, even though the interim government is facing a budget deficit of around US$3.2bn a month, equivalent to almost half of state spending , they appear content to maintain the status quo .
|Gulf Assistance To Provide Huge Boost|
|Egypt - Foreign Reserves|