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09 October 2012

Morsi says IMF loan compatible with Islamic banking

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Cairo: Egyptian President Mohamed Morsi sought to reassure conservatives at home that a request for a loan of nearly $5 billion (3.8 billion euros) in aid from the IMF would be compatible with Islamic banking principles.

Egypt in August asked for a $4.8 billion loan from the International Monetary Fund, which in turn urged economic reforms.

"This does not constitute Riba" said Morsi, in reference to abusive interest rates as defined by Islamic jurisprudence.

Islamic law prohibits usury but applying interest in some circumstances is acceptable.

"I would never accept that Egyptians live off Riba," Morsi told tens of thousands of people who packed the Cairo stadium to commemorate the 39th anniversary of the 1973 Yom Kippur war.

"We would rather starve than eat off Riba," Morsi said.

IMF approval of Egypt's request would come as a vital boon to its reeling economy.

An economic slump following the February 2011 ouster of Hosni Mubarak aggravated the main problems inherited from his regime: budget-draining subsidies, extreme social inequality, corruption and poor energy infrastructure.

A chief concern is the decline in central bank reserves which have plunged from $36 billion at the start of January 2011 to $14.4 billion, threatening Egypt's ability to import basic goods such as wheat and refined oil products.

IMF director general Christine Lagarde, who was presented with the loan request during a visit to Cairo in August, said the lender "will accompany Egypt" as it undertakes its challenging journey of reform.

But Lagarde made no firm commitments, saying the amount, details and terms of the loan programme -- which Cairo hopes to seal by the end of the year -- were still under discussion.

Speaking in Riyadh on Saturday, Lagarde said the IMF was not imposing prior conditions on the negotiations.

(Courtesy: AFP, October 6, 2012)

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