August 12, 2016Source: Reuters

Egypt’s preliminary deal for a $12 billion IMF loan programme can go to the board for approval only if the government secures $5-6 billion in bilateral financing for the first year, Chris Jarvis, the head of the IMF mission in Cairo, said on Thursday.

The International Monetary Fund (IMF) said earlier it had agreed in principle to grant Egypt a $12 billion three-year facility to support a government reform programme aimed at plugging a budget gap and rebalancing the currency market.

The long-awaited deal is subject to final approval by the IMF executive committee, which should meet in the coming weeks.

Asked if anything could yet preclude board approval, Jarvis told Reuters: “One key element that remains to be sorted out is we need to ensure that the programme is fully financed.”

“There’ll be a need for more financing in the first year of the programme. We need to ensure that that would be there before we go to the board. One of the things we are looking for is about $5-6 billion in bilateral support for Egypt,” he said in an interview.

Egypt has secured pledges from the United Arab Emirates and Saudi Arabia for about $4.5 billion, but that money has yet to materialise. Jarvis did not say if the bilateral lending was expected to come from Gulf countries, which have showered Egypt with billions in aid since Abdel Fatah al-Sisi, now president, toppled the Muslim Brotherhood in mid-2013.

Egypt agreed in December a $3 billion World Bank loan programme and a $1.5 billion African Development Bank (AfDB) programme, both to be disbursed over three years.

Jarvis said the World Bank would release the first $1 billion once a law introducing Value Added Tax (VAT) was passed by parliament and the government was in talks to release the second $500 million tranche of AfDB money.

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