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Egypt withdraws request for IMF, World Bank loans

business Updated: Jun 25, 2011 15:47 IST

AFP
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Egypt has withdrawn its loan request to the International Monetary Fund and the World Bank, an adviser to finance minister Samir Radwan told AFP on Saturday.

"We have decided not to have recourse to loans from the international financial institutions," Abdelfattah al Gebali said.

He said the decision was taken in response to the "pressure of public opinion," which has been largely hostile to the loan request, and after the submission of a new draft budget for 2011-2012 that foresees a reduction in public spending.

"The government has a policy of budget reductions," he added, saying it had decided to turn to local loans, financial aid and grants to finance its deficit.

Earlier this month, the finance minister announced that the IMF had granted Egypt a loan of three billion dollars over 12 months to help put its economy back on track.

"Egypt announces the end of negotiations with the IMF and the clinching of an agreement with the fund to relaunch the Egyptian economy," Radwan told reporters on June 5.

The two parties agreed to a "three-billion-dollar loan over 12 months... with an interest rate of 1.5%," he said, adding that the loan would help partly offset a budget deficit of $28 billion.

The Egyptian economy, which depends in large part on tourism, has seen a dramatic drop in tourist arrivals and near zero economic growth during and after the revolt that ousted former president Hosni Mubarak in February.

Tens of thousands of Egyptian workers in Libya, who used to send money back to their families in Egypt, also had to flee the conflict in the neighbouring north African nation.

Egypt, which estimates it needs between 10 and 12 billion dollars in international funding to keep it going until mid-2012, was courting loans worth roughly $6 billion from the IMF and the World Bank.

Cairo has said two Gulf countries will also help boost Egypt's economy.

Saudi Arabia has pledged four billion dollars in assistance in the form of long-term loans and grants, while Qatar pledged to invest $10 billion, according to Egyptian authorities.