A senior official from the International Monetary Fund will meet with Egyptian officials on Monday. They will discuss the $4.8 billion dollar loan agreement postponed in December because of the political instability in the country.
The IMF official, the Middle East and Central Asia director, Masood Ahmed, will meet with President Mursi, Prime Minister Hisham Kandil, some ministers, and the central bank governor as well. Discussion will be about recent developments in the economy and possible help by the IMF in meeting challenges facing the Egyptian economy.
The government recently replaced both the finance minister and the interior minister. These moves were made after promises made by President Mursi to assuage anger over the economic situation. Sources in the Egyptian cabinet confirmed the action.
Although the IMF loan had been rejected earlier in June 2011, it is now seen as crucial to dealing with the Egyptian deficit and economic slump caused by the continuing political turmoil. Political conflict continues as many reject the recently passed constitution. A parliamentary election is expected within the next two months. The new IMF loan has also been criticized by many.
Last Wednesday, the Egyptian pound hit record lows at the same time as debt insurance costs rose, even though Mursi promised that he would not allow Egypt to slip into a further economic crisis. The central bank was forced to implement new rules in order to conserve dwindling foreign reserves. The finance minister said that the pound would soon stabilize, but many economists thought otherwise. Some economists however did say that Egypt simply could not afford to continue its daily currency auctions. Egyptians have been swapping Egyptian pounds for US dollars driving down the value of the pound.
President Morsi dismissed talk on the street that the country was on the verge of bankruptcy, saying through his Twitter account:"How can anyone say that a country like Egypt, which is meeting all of its financial obligations, is going be bankrupt."
The Egyptian pound had fallen only 6% since the uprising in 2011. However, this week alone the currency has fallen 3.2%. The regime had been auctioning off currency at the rate of $75 million a day. Egyptians fear devaluation of the pound and banks have now imposed a limit on dollar withdrawals. Successful negotiations with the IMF may help ease the situation.