UK Changes Position on IMF Loan for Morsi’s Egypt

The United Kingdom has refrained from backing Egypt's request of a $4.8 billion loan from the International Monetary Fund (IMF). "We prefer to wait and see the results of the negotiations between Egypt and the IMF," a UK Foreign Office spokesperson told Ahram Online. During her recent visit to Cairo, the IMF's managing director, Christine Lagarde, received a formal request from Egypt for a $4.8 billion loan. "The UK thinks that this is a good opportunity for dialogue between the two parties," the spokesperson added. Asked whether the UK would back the Egyptian request if the IMF board decides in its favour, the spokesperson replied: "We do not have anything to say for the time being."

The UK's caution seems to mark a significant change in its attitude towards Egypt's calls for international assistance to overcome its economic difficulties. The UK provides 5 per cent of the IMF budget, making it the fourth biggest contributor, with equivalent voting power. It follows the US (18 per cent), Germany (6 per cent) and Japan (6 per cent). Early this year, the UK government was enthusiastic about an IMF offer of a $3.2 billion loan at a 1.5 per cent interest during Egypt's period of direct military rule.

A high level UK diplomat then told Ahram Online that the offer was "an amazingly good deal" with "virtually no conditionality.”UK support at the time followed a meeting of British representatives with the Supreme Council for Armed Force (SCAF), which until July 2012 had veto power on all political decisions. He diplomat explained that his government felt the deal the IMF put to Egypt was very favourable.

Speaking this week, the Foreign Office spokesperson insisted there was no change in the UK positions on the IMF loan after President Morsi took the reins of power from SCAF. uring her visit to Egypt last Wednesday, Lagarde met Morsi and his prime minister Hesham Kandil, and praised the Egyptian vision for reform. "We are impressed by the strategy that President Morsi and Prime Minister Kandil have proposed during our meetings today," she said at a joint press conference with Kandil.

An IMF technical team is due to arrive in Cairo in early September to begin work on arrangements for the mooted loan. "We prefer foreign borrowing at this stage given the low interest rate of the IMF loan compared to much higher rates when borrowing domestically," said Kandil, on the matter. He added that borrowing domestically would crowd out the private sector and the IMF loan would help ease liquidity problems. The IMF said in a statement it had maintained close dialogue on economic policy with Egyptian authorities since the start of the transition period in February 2011. It said it has also provided considerable technical assistance upon request from the government.