No austerity measures to be taken, #Egypt

The government dismissed plans to apply austerity measures on the lines of European countries, which are suffering financial crises such as Cyprus, Portugal, and Spain.

It said wages and social spending will not be cut, stressing also that no taxes would be levied on deposits.

The First Assistant Finance Minister and the member of the negotiating team with the International Monetary Fund (IMF) Hany Qadry said negotiations would not affect any of these items.

He stressed that while some European countries have cut wages, Egypt had earmarked LE17 billion to add the social increment of 2008 to the base salary of next July.

He said the program of rearranging priorities aims at rationalizing power and expanding tax base in some fields, adding these resources would be used for financing poor targeting programs.

Meanwhile, the IMF mission has arrived in Cairo to negotiate a $4.8 billion loan. An IMF source said the mission would suggest to the government the introduction of a package of additional measures to the reform program with the aim of filling the financing gap and minimizing the budget deficit.

The source said the IMF mission would offer Egypt a stopgap loan of $750 million this year and a similar sum next year.

In Dubai, the Director for the Middle East Department at the IMF Massoud Ahmed said the IMF could change the volume of the $4.8 billion loan it is currently negotiating with Egypt in line with the needs of the country. However, he did not disclose the nature and volume of change.

Minister of Finance al-Morsi Hegazy said the IMF mission would remain in Egypt until the middle of April and final negotiations would be completed this spring in Washington.

In a related development, the Central Bank of Egypt (CBE) has announced interest rate of 10.25% for banking deposits. A banking official said the mechanism of offering a fixed interest rate to deposits aims at absorbing excess liquidity in the banking system after interest rates had been raised on saving certificates.

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