Kandil’s comments came one day after Egypt’s central bank implemented a new system of buying and selling dollars, which it said would slow the depletion of the country’s dwindling foreign-currency reserves. Egypt is facing a rising budget deficit and mounting public frustration two years after popular demands for more jobs, economic equality and social justice led to the ouster of President Hosni Mubarak.
In a speech Saturday before the upper house of parliament, President Mohamed Morsi urged Egyptians to accept coming reforms and get on board with “stability” after a month of political unrest.
But the reforms will be no easy sell. Economists say there will be little gain without pain in the Arab world’s largest country, where about 40 percent of the population lives on less than $2 a day per person.
And many say the government is running out of time. Political turmoil since Mubarak’s overthrow has caused revenue from tourism and foreign investment to plummet. Egypt has more than halved its foreign-currency reserves to keep up with debt and budget obligations.
Egyptian officials say they are on track to sign the IMF loan by the end of January. But meeting the IMF’s expectations in the weeks ahead will be no less challenging than they were earlier this month, when preliminary plans to sign the deal were derailed by political unrest.
The government requested a delay as mass protests against a ratified constitution flared into violence.
An attempt to introduce spending cuts and tax reforms during the crisis was almost immediately shelved, underscoring the disorder that the government’s critics, and even some of its officials, say has prevailed in the upper ranks of Egypt’s recently elected Islamist government.
Government officials said the tax increases on income and key commodities, including gas and cement, would be reintroduced in time.
“We need to explain the economic facts to the people, and we need to explain that these [measures] will spare the poor and will only affect the rich,” said Mohamed Gouda, who heads the economic committee of the Muslim Brotherhood’s Freedom and Justice Party, which advises Morsi on economic policy. “If we can convey that, then the people will cooperate with any procedures that we take.”
The IMF loan will not cover Egypt’s $21.6 billion deficit, but economists say it will open the door to more loans and give Morsi’s administration a boost of credibility in international markets.
“If we don’t get the IMF, it will discourage a lot of potential donors,” said Hazem el-Beblawi, who recently served as Egypt’s finance minister. The IMF did not respond to a request for comment Sunday.