Egyptian President Mohamed Mursi.  Picture: REUTERS
Egyptian President Mohamed Mursi. Picture: REUTERS

CAIRO — Egypt’s government has outlined a revised programme that limits proposed tax increases as the country seeks to end popular unrest and complete talks on International Monetary Fund (IMF) loans to stabilise the economy.

Under the plan, sales tax would be increased on six commodities instead of 25, and the income tax exemption would be raised to 12,000 Egyptian pounds ($1,780) from 9,000 pounds, Prime Minister Hisham Qandil told reporters in Cairo on Monday. The six items include alcoholic and nonalcoholic beverages, cigarettes, iron and cement.

Egypt signed a standby agreement with the IMF for the loan in November, then requested a delay and suspended the tax hikes it had linked to the IMF programme. The government cited public opposition to its proposals for the U-turn, which came amid growing street protests against President Mohamed Mursi and his proposed new constitution.

Mr Mursi’s critics say the country’s economic and security situation has weakened since the uprising against Hosni Mubarak, with growth at the slowest in two decades as investors and tourists stay away. The IMF loan is seen as the key to helping to rebuild confidence and secure other donor funds.

The plan foresees a budget deficit of 10.9% of economic output in the fiscal year ending in June, according to a copy given to reporters. It said the gap would swell to 12.3% without the changes.

The plan also targets increasing foreign reserves to $19bn by the end of the next fiscal year, from $13.6bn last month, Investment Minister Osama Saleh said.

He said the country’s financing gap may widen "slightly". The programme would also include a 10% tax on initial public offerings, Mr Saleh said.

In an interview on the Al-Mehwar satellite channel on Monday, Mr Mursi called on the opposition to meet for talks on the parliamentary elections. His secularist and youth activist critics have shunned previous calls for dialogue, and many say they will boycott the four-stage vote, set to begin April 22.

Bloomberg