20 November 2012

Egypt: Prime Minister - IMF Agreement Very Close

Egypt aims to secure agreement on a US$4.8 billion loan from the International Monetary Fund (IMF) in a few days to help shore up its battered finances, Prime Minister Hesham Qandil said on Monday 19/11/2012.

"I think we are very close. We are still doing the last minute negotiations," Qandil said in an interview for the Reuters Middle East Investment Summit.

Qandil said that the government will be able to close the deal within the next coming few days.

The prime minister said targeting subsidies on gas cylinders so they reach the most needy had begun in several provinces. When implemented nationwide it will save Egypt LE5-6 billion (US$820-$980 million) a year, he said.

The government has yet to outline its full plan in public, to the frustration of investors. Economists say Egypt needs to start acting even before any deal is signed with the IMF to give the program credibility. "We have taken steps," Qandil said.

In addition to the butane gas scheme, he said a plan to eliminate subsidies on 95-octane gasoline, the highest grade available, could happen within a week. Officials had said it would happen last week. That measure would save the government a modest 55 million pounds a year, he said.

Another move will involve issuing smart cards so drivers can buy enough subsidized fuel to drive to work and back, but not for other trips, he said, adding that after they had used that amount they would be expected to pay market prices on fuel.

In a revenue-raising measure, Qandil said the government would introduce a new band for income tax that would sit between the 20 and 25 percent rates the wealthy, though he did not give a rate or say at what salary level the new rate would kick in.

He said a plan to hike the sales tax, now at 10 percent, was under review.

Regarding the death of 51 people, mostly children, when a train hit a school bus crossing the tracks, Qandil said that he thinks that it is a little bit unfair to hold this government accountable for the entire deteriorated infrastructure that has been taking place during the decades before.

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