Economy in Egypt 'worse than anyone imagines'

CAIRO // The prime minister told Egyptians yesterday that the economic situation was worse than imagined and that austerity was needed to rein in the budget deficit.

Kamal Al Ganzouri, 78, also said in a news conference that re-establishing security would be a priority for the "national salvation government" that he unveiled last week.

"The economic situation is worse than anyone imagines," he said. Al Ganzouri said the government would not agree to a $3.2 billion (Dh11.7bn) loan from the International Monetary Fund (IMF) until the outlook for the budget was clearer.

"If we are forced to resort to the IMF, we will resort to it. This is a matter open for discussion," he said, echoing comments by a general from the ruling army council who had said Egypt would only go to the IMF in "extreme need".

Egypt negotiated the loan with the IMF this year but turned it down in the summer and has since sent mixed signals over whether it will take it.

"There has to be austerity, but in sectors that we feel do not affect the Egyptian citizen. I want to reduce this [budget deficit], because the deficit remaining as it is means there will be inflation," he said.

Soaring prices were among the factors that drove people on to the streets to oust former President Hosni Mubarak, and have picked up again.