Egypt's army chief called for talks on national unity to end the country's mounting political crisis after a vital loan from the IMF was delayed and thousands of pro- and anti-government demonstrators took to the streets.
The meeting scheduled for Wednesday afternoon was called in response to an increasingly destabilizing series of protests that has unfolded since President Mohamed Morsi awarded himself sweeping powers on November 22 to push through a new constitution shaped by his Islamist allies in a referendum on Saturday.
Armed forces chief and Defense Minister Abdel Fattah al-Sisi called for a meeting of “national unity for the love of Egypt to bring together partners of the country in the presence of the president of the republic”, the army spokesman said.
An aide said Morsi had supported the call for talks. The Muslim Brotherhood said it would be there, while the main opposition coalition said it would decide on Wednesday morning whether to attend.
Earlier, the finance minister disclosed that a $4.8 billion International Monetary Fund loan, a cornerstone of Egypt's economic recovery hopes, would be delayed until next month.
Mumtaz al-Said said the delay was intended to allow time to explain a widely criticized package of economic austerity measures to the Egyptian people.
The announcement came after Morsi on Monday backed down on planned tax rises, seen as essential for the loan to go ahead, but which the opposition had fiercely criticized.
“Of course the delay will have some economic impact, but we are discussing necessary measures (to address that) during the coming period,” Said told Reuters, adding: “I am optimistic … everything will be well, God willing.”
Prime Minister Hisham Kandil said the measures would not hurt the poor. Bread, sugar and rice would not be touched, but cigarettes and cooking oil would go up and fines would be imposed for public littering. In a bid to rebuild consensus, he said there would be a public consultation about the program next week.
In Washington, the IMF said Egypt had asked for the loan to be postponed “in light of the unfolding developments on the ground”. The Fund stood ready to consult with Egypt on resuming discussions on the stand-by loan, a spokeswoman said.
GUNMEN OPEN FIRE
On the streets of the capital, tensions ran high after nine people were hurt when gunmen fired at protesters camping in Tahrir Square, according to witnesses and Egyptian media.
The opposition has called for major protests it hopes will force Morsi to postpone the referendum. Thousands gathered outside the presidential palace, whose walls are scrawled with anti-Morsi graffiti.
A bigger crowd of flag-waving Islamist Morsi backers, who want the vote to go ahead as planned on Saturday, assembled at a nearby mosque, setting the stage for further street confrontations in a crisis that has divided the nation of 83 million.
In Egypt's second city of Alexandria, thousands of rival demonstrators gathered at separate venues. Morsi's backers chanted: “The people want implementation of Islamic law,” while his opponents shouted: “The people want to bring down the regime.” Others cities also witnessed protests.
The upheaval following the fall of Hosni Mubarak last year is causing concern in the West, in particular the United States, which has given Cairo billions of dollars in military and other aid since Egypt, the Arab world's most populous nation, made peace with Israel in 1979.
The turmoil has also placed a big strain on the economy, sending foreign currency reserves down to about $15 billion, less than half what they were before the revolt two years ago as the government has sought to defend the pound.
“Given the current policy environment, it's hardly a surprise that there's been a delay, but it is imperative that the delay is brief,” said Simon Williams, HSBC economist in Dubai. “Egypt urgently needs that IMF accord, both for the funding it brings and the policy anchor it affords.”
The IMF deal had been seen as giving a seal of approval to investors and donors about the government's economic plans, vital for drawing more cash into the economy to ease a crushing budget deficit and stave off a balance of payments crisis.
In central Cairo, police cars surrounded Tahrir Square in central Cairo, the first time they had appeared in the area since shortly after Morsi awarded himself sweeping temporary powers in a move that touched off widespread protests.
The attackers, some masked, also threw petrol bombs that started a small fire, witnesses said.
“The masked men came suddenly and attacked the protesters in Tahrir. The attack was meant to deter us and prevent us from protesting today,” said John Gerges, a Christian Egyptian who described himself as a socialist.
The latest bout of unrest has so far claimed seven lives in clashes between the Islamist Muslim Brotherhood and opponents who gathered outside Morsi's presidential palace.
The Republican Guard, which protects the palace, has yet to use force to keep protesters away from the building, now ringed with tanks, barbed wire and concrete barricades.
The army has told all sides to resolve their differences through dialogue, saying it would not allow Egypt to enter a “dark tunnel”. For the period of the referendum, the army has been granted powers by Morsi allowing it to arrest civilians.
In statement issued after rights groups criticized the army's new police powers, the presidency said anyone arrested by the military during the referendum would face civil rather than military courts. It said the army's new role would only last until results are declared after Saturday's referendum.
The army has portrayed itself as the guarantor of the nation's security, but so far it has shown no appetite for a return to the bruising front-line political role it played after the fall of Mubarak, which severely damaged its standing.
Leftists, liberals and other opposition groups say the hastily arranged constitutional referendum is polarizing the country and could put it in a religious straitjacket.
Opposition leaders want the referendum to be delayed and hope they can get sufficiently large numbers of protesters on the streets to change Morsi's mind.
The main association of Egypt's judiciary, the Judges' Club, voted against supervising the referendum, but the Islamists are confident they can muster enough judges to make sure the vote goes ahead with the necessary judicial supervision.
Islamists have urged their followers to show support for Morsi and for a referendum they feel sure of winning.
The opposition says the draft constitution fails to embrace the diversity of the population, a tenth of which is Christian, and invites Muslim clerics to influence lawmaking.
Additional reporting by Tamim Elyan; Writing by Giles Elgood; Editing by Peter Graff and Will Waterman