Egypt strengthens Islamist role in cabinet, eyes IMF deal
Published Sunday 06/01/2013 (updated) 07/01/2013 17:20
Egyptian President Muhammad Mursi (Reuters/File)
By Tom Perry and Maria Golovnina
CAIRO (Reuters) - Egypt reshuffled its government on Sunday to strengthen Islamist control and pledged to complete talks with the International Monetary Fund on a $4.8 billion loan deal to stave off a currency crisis that risks igniting more unrest.
A senior IMF official is due in Cairo on Monday to meet Egyptian leaders over the deal, which was postponed last month to give Egypt more time to tackle political tensions before introducing unpopular austerity measures.
Finance minister Al-Mursi Al-Sayed Hegazy was sworn in by President Muhammad Mursi as part of a reshuffle that expanded the Islamist Muslim Brotherhood's direct control over ministries.
Mursi fired his finance and interior ministers after promising a reshuffle to assuage anger at an economic crisis which has seen the currency lose more than a tenth of its value since a 2011 uprising 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 to journalists, Hegazy said he was "completely ready to complete discussions" with the Fund.
The political conflict triggered lethal street protests last month that added to pressure on the Egyptian pound as speculators worried about the instability began exchanging their local currency for dollars.
As he spoke on Sunday, the pound reached a new low, trading at 6.45 to the US 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 Dec. 30 in 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, is an Islamic finance expert who teaches economics at Alexandria University.
He obtained doctorate in 1985 from the University of Connecticut for a study on how oil contributed to Kuwait's economic growth, according to a copy of his CV sent to Reuters by Alexandria University. It listed two dozen research papers on Islamic economics which he had either written or reviewed.
Though he is not a member of the Muslim Brotherhood - the movement that propelled Mursi to power in a June election - he is seen as sympathetic to the group's aims.
Mursi swore in a total of 10 new ministers as part of the reshuffle of Prime Minister Hisham Kandil's government. It brought new parts of the bureaucracy under direct Muslim Brotherhood control, including the supply ministry.
The new cabinet has a total of eight ministers who are members of the Brotherhood or the Freedom and Justice Party, its political arm, a spokesman for the party said. The previous cabinet had five Brotherhood ministers.
"Dr. Mursi would like to be sure that he has a cabinet that shares his major orientations," said Mustapha Kamal Al-Sayyid, a professor of political science at Cairo University. "He wants to be surrounded by like-minded ministers."
Reserves at critical level
The IMF signed the loan deal at staff level 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 Dec. 26.
The IMF said on Saturday its Middle East and Central Asia director, Masood Ahmed, would visit Cairo to meet with Egyptian officials to discuss recent economic developments and "possible IMF support for Egypt in facing these challenges".
The Brotherhood is wary of any government measures that could damage its popularity ahead of parliamentary elections due to get underway 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, 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 had slipped to $15.015 billion in December - little changed from November's level.
The pound slid by half a percent on Sunday 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 $60 million it had offered to banks at Sunday's auction. Last week, the bank sold $300 million at four similar auctions which bankers have described as a move towards a free float of the currency.