EGYPT'S interim government is to resume talks with the International Monetary Fund over an emergency $3bn credit facility amid signs of a deepening crisis in its already hard-hit economy.

The economic woe in Egypt where 40 per cent of people live on or below the poverty line has become one of the biggest problems facing the country a year on from the start of the popular uprising that pushed former president Hosni Mubarak from power.

Almost a year of political uncertainty, including three cabinet reshuffles, a moveable timetable for transition to civilian rule and an insistence that any financial assistance should be uncondition-al, have followed leading to fears the country's economy could collapse.

The return to the IMF is embarrassing for the interim government after its clumsy handling of negotiations for a similar loan offered last June, which Egypt rejected rather than accept conditions attached to it.

IMF sources said that Kamal al-Ganzouri, Egypt's prime minister, had requested the reopening of negotiations with Masood Ahmed, the IMF's Middle East and north Africa director, who is expected to travel to Cairo.

Sporadic outbreaks of violence, particularly in Cairo, have discouraged foreign investors and devastated thetourism industry, on which Egypt is heavily reliant.

Empty hotels and deserted riverboat restaurants and clubs have become the most visible sign of the city's abandonment by foreign tourists.

According to the country's tourism ministry, tourism dropped last year by almost a third, costing the economy at least $9bn. The tourism industry has also been spooked by comments from figures in the Islamist Freedom and Justice party which is expected to win 40 per cent of the votes, the largest share, in the country's elections suggesting the party may ban alcohol.

Economic figures just released have painted an increasingly bleak picture,even as Egyptians have been voting in elections for the Lower House, which will select the body to draw up its new constitution.

Egypt's foreign reserves have halved in 12 months to $18.1bn enough for a couple of months of imports while inflation has continued to climb from over seven per cent in the autumn to 10.4 per cent in December on the back of high food prices. Egypt's sovereign debt has also been downgraded recently by three major credit rating agencies.

The grim situation for ordinary Egyptians is likely to be exacerbated by new austerity measures announced by the finance minister.—The Guardian, London