UPDATE 2-Egypt PM says IMF loan talks to resume in late October

(Adds plan to seek public support for austerity measures)

CAIRO, Oct 3 (Reuters) - Egypt's prime minister said an IMF team would come to Cairo in the last week of October to resume talks on a loan sought by his government, which was still working on the major issue of how to reduce fuel subsidies.

The government will seek public support for its economic reform plans in a "social dialogue" beginning on Thursday before presenting them to the president next week, Prime Minister Hisham Kandil said on Wednesday.

Egypt urgently needs financial support to prop up state coffers weakened by economic turmoil since the popular uprising last year that ousted President Hosni Mubarak.

It has been negotiating a $4.8 billion loan from the International Monetary Fund but has indicated it may seek to increase that amount.

The IMF wants Egypt to put a programme in place to narrow a budget deficit that has mushroomed to 11 percent of gross domestic product since the uprising.

One part of that programme is likely to be a restructuring of subsidies on petroleum products, which eat up about 25 percent of total government spending.

Analysts say measures to reduce energy subsidies are certain to be unpopular among many Egyptians, some of whom joined the uprising last year because of economic grievances.

Kandil told the news conference that a series of measures are needed to ensure that subsidies reach those who deserve them most.

Until now the government has not settled on the final form or timeframe for restructuring the subsidies or whether petroleum products would be distributed using coupons or electronic smart cards, he said.

"All these are ideas that are being discussed and will be discussed by the government," Kandil said.

In an earlier interview with Reuters, Petroleum Minister Osama Kamal said the idea of fuel ration coupons had already been dropped and the government had opted for smart cards.

An Egyptian delegation will hold talks with the fund during an annual IMF and World Bank conference in Tokyo on Oct. 9-14 to prepare for the Cairo visit, Kandil said.

The visit had been scheduled to take place before the end of September, but on Monday both the IMF and the government said it had been delayed to give Egypt more time to finalise an economic reform programme.

Kandil said the government would begin trying to sell its reform proposals to the public before presenting them to newly elected President Mohamed Mursi for approval next week.

"We will begin a social dialogue starting on Thursday, and in this dialogue we will try to have representation from the various sections of society, whether political, social or technical, so that we might collect comments and draw up a vision and plans in their final form," Kandil said.

(Editing by Toby Chopra and Jane Baird)


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Keywords: EGYPT IMF/