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Egypt Political Crisis Threatens To Worsen Economy

Negotiations for the loan had dragged on for over a year, as the country's need for cash following the uprising only grew. It had originally aimed for $3 billion in aid but upped the request as the economy deteriorated.

Aside from the funding itself, the loan was seen as a key stamp of approval needed by the government to encourage other countries and institutions to lend it more of its expected external needs for the coming years, a figure economists put at over $10 billion.

Failing that, it is difficult to see how Egypt alone can get back on its feet. The key tourism sector has yet to recover from the fallout of the popular uprising that toppled longtime-ruler Mubarak, and neither has the stock market.

Official unemployment stands at over 10 percent. Fuel shortages and power outages have aggravated the public, as have anticipated cuts in fuel subsidies, raising the possibility of a vicious cycle of resentment that could continue to fuel protests if additional foreign funding is not acquired.

"The IMF loan is really the only option," economist Simon Kitchen at EFG-Hermes said.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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