CAIRO: Egypt is looking at ways to reduce its dependence on borrowing from local banks because it is a burden on the economy, the finance minister said on Sunday.
The government, grappling with an economic slowdown and rising costs after a popular uprising, rejected an offer of IMF funds in June and has said it will rely on the local market to plug its financing needs.
But Egypt’s banks are demanding higher yields at government debt auctions, so that yields at last month’s Egyptian treasury bill auctions rose to their highest since the 2008 financial crisis. Traders have said they could rise further if the government does not secure external funding.
"The government is considering ways to decrease reliance on internal funding because it constitutes a burden on the economy and is a temptation for banks to abandon their original role in funding the private sector," Finance Minister Hazem El-Beblawi told reporters when asked a question on treasury bonds.
The IMF has said it is still willing to lend money to Egypt if Cairo changes its mind and asks for assistance.
Beblawi said the government could not continue with Egypt’s costly subsidy regime that lowers prices for consumers and industry, and changes were needed within two or three years.
"We want to start with things that are less harmful to the consumer," Beblawi said. "People must get used to the idea that the subsidy is an exception."
The government has begun some subsidy reforms including improvements to the way cooking gas is distributed to the poor.
Beblawi also said the government would challenge rulings by the courts that have overturned deals already agreed to privatize state assets.
"We will seek all legal methods to reduce the effects of these rulings on third parties like banks and investors and will challenge them at the cassation court."
