Egypt’s President Mohammed Mursi meeting with his cabinet in Cairo, yesterday.
CAIRO: Egypt’s president added fellow Islamists to a reshuffled government yesterday and the new finance minister pledged to finish talks on an IMF loan to stave off a currency crisis that risks provoking more popular unrest.
A senior IMF official is due in Cairo today to meet Egyptian leaders over the $4.8bn loan deal, which was postponed last month to give Egypt more time to tackle political tensions before introducing unpopular austerity measures.
The new finance minister Al Mursi Al Sayed Hegazy is an expert on Islamic finance and is seen as sympathetic to the aims and thinking of President Mohammed Mursi, elected in June, and to his Muslim Brotherhood. A Brotherhood spokesman denied Hegazy was a member but said three other new ministers were.
The new ministers in what is still largely a government of non-partisan technocrats take office in an economic crisis which has seen the currency lose more than a tenth of its value since the uprising two years ago which toppled Hosni Mubarak.
Political unrest over a new Islamist-tinged constitution had delayed tax increases believed to be key to the IMF deal, but in a brief statement, Hegazy said he was “completely ready to complete discussions” with the International Monetary Fund.
The political conflict triggered lethal street protests last month that added to pressure on the Egyptian pound and speculators began exchanging local currency for dollars.
As Hegazy spoke yesterday, the pound reached a new low, trading at 6.45 to the dollar. It has lost more than 4 percent of its value against the dollar since the central bank brought in a new system of currency auctions on December 30 in an effort to preserve the country’s dwindling foreign reserves.
Importers have warned that the weakening currency and uncertainty about how low it will go could lead to sharp rises in the prices of imports including food.
Hegazy, who replaces Mumtaaz Al Saeed, a career bureaucrat, teaches economics at Alexandria University. In 1985, he earned a doctorate from the University of Connecticut, according to a biography provided by Alexandria University. It listed two dozen papers on Islamic economics which he had written or reviewed.
Religious strictures on charging interest on loans creates particular economic conditions for Muslim businesses. The Muslim Brotherhood now controls eight of some 35 portfolios in Prime Minister Hisham Kandil’s cabinet, including the influential supply, information and housing ministries.
“Dr Mursi would like to be sure that he has a cabinet which shares his major orientations,” said Mustapha Kamel Al Sayyid, a professor of political science at Cairo University. “He wants to be surrounded by like-minded ministers.”
The IMF signed the loan deal in November but final ratification was postponed last month at Cairo’s behest because of the unrest set off by Mursi’s drive to fast-track a controversial new constitution.
Fearing further public anger at the time, Mursi cancelled tax increases believed to be part of a package of austerity measures agreed as part of the IMF deal.
The constitution was approved in a popular referendum and signed into law on December 26.
The IMF said on Saturday its Middle East director, Masood Ahmed, would visit Cairo to meet Egyptian officials to discuss recent economic developments and “possible IMF support for Egypt in facing these challenges”.
Prime Minister Kandil said today’s meeting aimed to reassure the IMF about the government’s plans and the economy’s capacity for recovery.
The Brotherhood is wary of any government measures that could damage its popularity ahead of a parliamentary election due to get under way by the end of February.
The IMF deal is seen as vital for boosting investor confidence and staving off a financial crisis.
Having spent more than half the country’s foreign exchange reserves defending the pound since Mubarak was toppled, the central bank has warned the reserves had fallen to a critical level. Economists say the country’s readily available foreign reserves will cover just over two months of imports.
The central bank said the reserves were at $15.015bn in December - little changed from November’s level. The pound slid by half a percent yesterday at the central bank’s fifth auction of foreign currency under the new auction system designed to preserve the reserves.
The bank sold all of the $60m it had offered to banks at yesterday’s auction. Last week, the bank sold $300m at four similar auctions which bankers have described as a move towards a free float of the currency.