IMF says Egypt could apply for emergency credit

Egypt may qualify for an International Monetary Fund bridge loan of more than $700 million a year that could help Cairo stave off collapse of its crisis-stricken economy, an IMF official said on Monday, The Wall Street Journal reported.

"Egypt needs bold and ambitious policy actions to address its economic and financial challenges without further delay," IMF spokeswoman Wafa Amr said.

The emergency-credit line, under the terms of the IMF's Rapid Financing Instrument, wouldn't have the same conditions that are normally necessary for IMF bailouts, making it far easier for Egypt to get much-needed short-term cash.

It could also trigger a flood of credit from other sources around the world that are waiting on an IMF loan as financing assurance.

Egypt's Minister of Planning and International Cooperation Ashraf al-Araby told a news conference on Sunday that the country needs broad economic policy changes, not an emergency bailout. An official at the Egyptian Ministry of Finance declined to comment.

Cairo could use the cash to keep it going until after coming elections, when the government hopes to gain a stronger mandate for the economic changes needed to put the country back on solid ground.

The bridge loan could provide interim financing "while a strong medium-term policy program is being put in place," Ms. Amr said.

"Ultimately, this is a decision the authorities will have to take," she said.

President Mohammed Morsi's government has failed to seal a deal with the IMF for a longer-term $4.8 billion loan. The IMF says Egypt needs to raise taxes and phase out most fuel subsidies. Such actions, or other policies that cut spending while raising revenue and still protecting the poor, are necessary for the country to fix its finances, according to the IMF.

Ms. Amr said the fund "is fully committed to supporting Egypt at this critical time," and is currently reviewing the authorities' proposed economic program. Fund officials, she added, are discussing "the next steps in our engagement."

Meanwhile, the country's cash reserves are at critically low levels.

An interim loan could ease some of the pressure for the government to make tough political decisions about how to fix the economy. It wasn't clear why Cairo hadn't yet applied for the facility.

The longer Egypt delays a full loan program with the IMF, the stronger its potential negotiating hand, although such a tactic can bite both ways. International officials want to avoid further Egyptian instability, fearing it could fuel unrest across an already volatile region.