Egypt-U.S. Rift May Imperil IMF Funding as Reserves Threaten Currency Run [View all]
By Mariam Fam and Alaa Shahine - Sun Feb 19 08:00:02 GMT 2012
Egypt’s politicians and media are issuing ever-louder accusations of American meddling just as the country seeks loans from the International Monetary Fund, where the U.S. is the biggest shareholder.
“America is behind the chaos,” blared a red headline on the front page of state-run Al-Gomhuria newspaper last week. The Muslim Brotherhood said U.S. money was being spent “to destroy Egypt and ruin its society.” The dispute over the prosecution of employees at U.S.-based NGOs, accused of breaking rules on foreign financing, has opened the deepest rift for decades between the military allies. It’s happening as the government prepares to submit an economic program to parliament that will be the basis for its application for a $3.2 billion IMF credit.
Egypt needs the money to help an economy in stagnation since last year’s uprising against Hosni Mubarak. Tourists and investors have stayed away and the central bank, seeking to avert a currency crisis, spent more than half its reserves. Bond yields rose this month amid investor concern that a worsening dispute with the U.S. will complicate efforts to raise funds.
The rift “adds fuel to the fire and can negatively affect the conditions under which Egypt might obtain an IMF program,” said Sergey Dergachev, who helps manage $8.5 billion of emerging-market assets at Union Investment Privatfonds in Frankfurt. “The IMF is still very much dominated by the U.S.”