"(Reuters) - An IMF delegation will arrive in Egypt on Wednesday for talks with the government on a USD 4.8 billion loan...Spokesman Alaa El Hadidi added that Egypt would not seek any emergency loan from the International Monetary Fund and faced no "crisis" in funding the import of essential commodities...Reserves of foreign currency have fallen to critically low levels, threatening Egypt's ability to buy in supplies of wheat, of which it is the world's biggest importer, and fuel...Hadidi, seeking to allay public concerns over power cuts and long queues at petrol stations, ruled out an emergency loan, as suggested by the IMF. He added that the country was still able to buy essential imports..."(The supply) of wheat and loaves of bread is safe," he told reporters. He added that indications of a higher harvest this year meant Egypt would use locally-grown wheat in the place of wheat that would otherwise have been imported."
NYT: Fuel shortage puts a strain on Egypt
"US officials are warning of disaster unless Egypt soon carries out a package of tax increases and subsidy cuts tied to a USD 4.8 billion loan from the International Monetary Fund. That would persuade other lenders that Egypt was creditworthy enough to obtain billions more in additional loans needed to meet its yawning deficit...Egypt has held two years of unsuccessful talks with the IMF, and the current government is still balking at the politically painful package of overhauls — even as rising prices and unemployment make those measures more difficult with each passing day...“They are operating on the notion that Egypt is too big to be allowed to fail, that the US and the West will step in,” Shimy said. “They think Egypt has a right to get the loan, and I think they will probably keep pushing all the way.”...Officials of the Morsi government have indicated that they prefer to wait until the election of a new Parliament, which might demonstrate broader public agreement on the need for changes. But a court decision striking down the election law has postponed the vote until at least the fall, and many economists say Egypt cannot endure the delay...Energy subsidies make up as much as 30 percent of Egypt’s government spending, said Ragui Assaad, of the Economic Research Forum here."
The official exchange rate has has remained under control (see here)
"The recent jump in prices is an indication of a black market that is drying up due to higher demand than supply, one banker who declined to be named said...“Clients who work on parallel markets confirm that prices jumped. This is a major leap that happened in the past three days because of the lack of availability,” he said...“It is not dry yet but it is not as liquid as it was ... It is quite possible for the dollar to reach 8 pounds or even higher if the problem continues,” he said.
Is the Morsi government really going to bring their finances to the brink and hope the US / Europe / Gulf States bail them out? Or is he looking for political cover before making hard budget decisions?
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