Egypt requests $2bn Russia loan as Mursi meets Putin

Russian President Vladimir Putin (right) and his Egyptian counterpart Mohamed Mursi attend a news conference after talks in Sochi, Russia yesterday. Egypt has requested a $2bn loan from Russia during a meeting between Mursi and Putin.

Bloomberg, Reuters/Moscow

Egypt requested a $2bn loan from Russia during a meeting between President Mohamed Mursi and his counterpart, Vladimir Putin, Egyptian Industry and Trade Minister Hatem Saleh said.

The countries’ finance ministers will discuss the details, Putin’s foreign-policy adviser Yuri Ushakov told reporters after the meeting in the Russian Black Sea town of Sochi.

Mursi earlier told Putin that he wants to forge a “real political union” between the two nations, calling him a “dear friend” and “brother” as they began their talks. The Russian leader said ties are being restored “at a full scale.”

Russia plans to restore strategic ties with Egypt, according to Alexei Pushkov, the head of the Russian parliament’s foreign-affairs committee.

“The Americans are aiding Egypt with around $2bn per year,” Pushkov said by phone from Moscow yesterday. “They understand the strategic role of this country in the Arab World. We should finance our foreign policy too.”

Russia is ready to consider any aid request from Egypt, Putin’s spokesman Dmitry Peskov told reporters on Thursday. The North African country has invited Russia to build a nuclear power plant, Russian Energy Minister Alexander Novak said in Sochi yesterday.

Egypt and the Soviet Union became allies from the 1950s under Egyptian President Gamal Abdel Nasser and Soviet leader Nikita Khrushchev. Egypt received Soviet military assistance, including during the 1973 Arab-Israeli war, and the USSR financed key facilities such as the Aswan High Dam — a project to irrigate arable land and supply electricity.

The ties lapsed after Nasser’s death in 1970, when the Arab nationalist was succeeded by Anwar Sadat, who set the regional powerhouse on a new pro-US track that accelerated under Mubarak. The International Monetary Fund and Egyptian finance officials are working to conclude talks “as quickly as feasible” on a proposed $4.8bn loan deal to ease the country’s deepening economic crisis, a senior official said yesterday.

Meanwhile, Egypt Finance Minister El-Morsi El-Sayed Hegazi said as he urged the country’s political parties to unite around an economic programme attached to the aid.

“We are promised that this will be in a few weeks,” Hegazi said in a Bloomberg News interview yesterday in Washington when asked about the possible loan. “The IMF would like to see to what extent the political parties and the authorities are ready to have some prior actions” taken, such as a general sales tax, he said.

Egypt’s bid to conclude the loan agreement has been delayed amid political bickering and unrest that made it harder to implement IMF-backed changes such as tax increases. The economy is still struggling to recover from the turmoil that followed the 2011 uprising that ousted President Hosni Mubarak.

“I very much hope that we can succeed,” IMF Managing Director Christine Lagarde said at a news conference on Thursday, adding that more work needs to be done. “I very much hope that we do, because I think the country is exposed to vulnerabilities.”

The economy of the most-populous Arab country has struggled to recover from the 2011 uprising, growing at about 2% annually, compared with a 6.2% average in the five previous years. The country secured $5bn in aid from Qatar and Libya last week to help replenish foreign reserves that have dropped by more than 60% since December 2010.

The Qatar aid should come in the form of bond buying, Hegazi said.

Even with foreign aid, Egypt needs the IMF loan and an economic program that will help reduce the budget deficit, create jobs and attract foreign investment, Hegazi said.

“Egypt needs their political parties to reconcile, to have consensus and to know that we can’t wait to resolve political issues,” he said.

Egypt’s negotiations with the IMF in Cairo ended this week without a loan agreement, halting a bond rally.

“It’s of the essence that political uncertainties are clarified in Egypt and that the authorities address the underlying serious economic issues that they have,” Jose Vinals, the head of the IMF’s monetary and capital markets department, said during a news conference April 17.

Hegazi also said the IMF wants Egypt to rationalise fuel subsidies, which he said the government has started doing.

“We are sincere about solving our economic problems, we are sincere about achieving this reform,” he said. “Egypt will do its homework for the sake of its own people.”

IMF Director for the Middle East and North Africa Masood Ahmed said: “I don’t have a date for when those discussions will be completed precisely, but Egyptian authorities and our own team are working diligently to try to bring that set of discussions to a conclusion as quickly as feasible.” The talks are taking place on the sidelines of IMF and World Bank meetings in Washington.

An IMF deal will help shore up confidence in Egypt’s economy and reassure private investors and donors that the country is committed to economic reforms, which include cutting fuel subsidies and raising sales taxes.