Reuters: Regulatory News: UPDATE 2-Kerry to stress need for Egypt consensus for IMF deal

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UPDATE 2-Kerry to stress need for Egypt consensus for IMF deal Mar 2nd 2013, 13:18 Sat Mar 2, 2013 8:18am EST * Kerry on first visit to Arab world since taking office * Egypt needs to cut energy subsidies - senior U.S. official * IMF loan agreed in principle but delayed by violence * Opposition to boycott lower house elections By Arshad Mohammed CAIRO, March 2 (Reuters) - U.S. Secretary of State John Kerry will stress the importance of Egypt reaching an IMF loan agreement and the need for political consensus on painful economic reforms, a senior U.S. official said on Saturday. Kerry arrived in Egypt on his first visit to the Arab world since taking office for talks with the leaders of a country that is mired in political and economic crisis two years after the overthrow of autocrat Hosni Mubarak. With Egypt's pound and foreign currency reserves sliding, the official said that if Cairo could agree on a $4.8 billion loan from the IMF, this would bring in other funds from the United States, European Union and Arab countries. However, the official said Kerry believed Egypt needed to increase tax revenues and reduce energy subsidies - measures that are likely to prove highly unpopular with a people struggling during the country's crisis. "His basic message is it's very important to the new Egypt for there to be a firm economic foundation," the official told reporters as Kerry flew to Cairo. "In order for there to be agreement on doing the kinds of economic reforms that would be required under an IMF deal there has to be a basic political ... agreement among all of the various players in Egypt," the official said on condition of anonymity. Egypt said on Thursday it would invite a team from the International Monetary Fund to reopen talks on the loan and the investment minister expressed hope that a deal could be done by the end of April. The loan was agreed in principle last November but put on hold at Cairo's request during street violence the following month in protest at a planned rise in taxes. While the tax rise was withdrawn, Islamist President Mohamed Mursi is likely to face violent protests on the streets as any cuts in subsidies demanded by the IMF which will push up living costs in a country where poverty is rife. HEAVY SUBSIDY COST Energy subsidies soak up about 20 percent of the government budget, bloating a deficit which is expected to soar to 12.3 percent of annual economic output this financial year unless the government takes urgent action on reform. Kerry will stress the need for agreement across the political spectrum on reforms and winning approval in the Shura Council, Egypt's upper house of parliament. "What they need to do is ... things like increasing tax revenues, reducing energy subsidies, making clear what the approval process will be to the Shura Council for an IMF agreement, that kind of thing," said the official. Hopes for political consensus between the ruling Islamists and opposition parties seem slim. Liberal and leftist opposition parties have announced a boycott of parliamentary elections, scheduled for April to June, over a new constitution produced by an Islamist-dominated assembly and over other grievances. Kerry is due to meet opposition leaders on Saturday but the list of participants is missing many senior figures, including Hamdeen Sabahy, who came a close third in presidential elections last year and former U.N. nuclear agency chief Mohamed ElBaradei. Egypt's foreign currency reserves have fallen to not much more than a third of their level before the 2011 revolution and the Egyptian pound has lost more than 8 percent against the dollar since the end of last year. Kerry would not explicitly tell the opposition parties to renounce their boycott of the lower house polls, the official said. However, the official added: "If they want to engage, if they want to assure that their views are taken account, the only way to do that is to participate. That they can't sit aside and just assume that somehow by magic that all of this is going to happen ... They've got to participate." Link this Share this Digg this Email Reprints

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