The IMF loan issue is looming again in the horizon, a few months after the rejection of a similar loan. It was claimed that the first loan was rejected because its conditions were unacceptable, however, such conditions were never revealed to the public.
Dr. Fayza Abu El-Naga, Minister of International Co-operation and Planning, who has previously rejected the first loan, started to refer to conducting positive consultations with IMF and confirming that this time, the loan is “conditionless”. She furthermore stated that negotiations are necessary to get a $ 3 billion loan from the IMF to support the budget.
Only three months earlier, Dr. Abu El-Naga had stated that Egypt is not in need of any loans to support its budget and that the Egyptian economy is rather in need of pumping new investments to expand and create more jobs. Today, she is talking about getting a loan to cover the budget deficit although this step does not help efforts exerted to achieve economic recovery, boost growth rates or create new jobs.
Why was the previous loan rejected, although Egypt’s credit rating was much better than now, which means that its negotiating position with the IMF was much better? Noteworthy, the IMF gives low-interest loans under arrangements that stipulate economic or political conditions. Why are we conducting negotiations regarding the same loan, today, where Egypt is in a bad negotiating position, in view of its deteriorating political and economic circumstances? Whose responsible for such confusion and lack of sound vision?
The IMF was involved over the past two decades in drawing and implementing the economic and financial policies of Egypt, which led to low living standards, high poverty rates, and deterioration of public services and human resources development, as stated by the World Bank and UNDP reports. Policies supported by the IMF resulted in the richer getting richer at the expense of the poor, and downsizing the public spending on health services and education offered to the majority of citizens.
Today, the government is negotiating again with the IMF to get a fresh loan, under the pretext that the budget deficit reached unacceptable levels. The government ought to have reviewed the budget after the revolution to be able to restructure it, taking into consideration the requirements of social justice and human resources development, instead of applying the same old policies of the former regime and its Minister of Finance who allocated more than 19% of the public spending for subsidizing fuel. The majority of such subsidy goes to capitalists and does not benefit the poor. One fifth of the budget also went to the public debt service while the sums allocated for health, education and social security remained the same.
Rejecting or approving the IMF loan is not the problem but the concern lies in the absence of public participation and lack of transparency of the Egyptian economic scene.
The transitional authority purposely uses the scarcely announced financial data to serve its own interests through scaring the public from the revolution, at one time, or giving a rosy picture of the economy, at another. Absence of transparency, lack of enough data, and publishing information which is manipulated by the government or the ruling authority is still going on. There is another dilemma related to the fact that the economic team in the current transitonal government belongs to the former regime and its dissolved party. Such government does not have the legal right to get such huge loans that would lead to further burdens on the coming generations, without any public authorization or real parliamentary monitoring or the least measure of transparency that would allow the public to see for itself the obligations it would have to fulfill due to decisions taken by this interim government.
The same applies to the international commitments made by the Egyptian government after toppling Mubarak as they all lack transparency regarding the amount of the loan or its sources.
“The Popular Campaign to Drop Egypt’s Debts” monitored that the Egyptian foreign debt rose to hit around $ 35 to $ 36.3 billion during the past year, according to the Economist. This comprises loans obtained during interim governments without any public authorization or political legitimacy and without disclosure.
“The Popular Campaign to Drop Egypt’s Debts” stresses the fact that the current IMF loan is an odious one as the current government does not represent the Egyptian people whom it is negotiating on their behalf, and the donors realize that the current government is not a legitimate one. In case the government got a $ 3.2 billion loan from the IMF, the sum of loans obtained over the past year would be around $ 4 billion, which is four folds the average annual loans obtained during Mubarak’s era. This would pose a huge burden on the Egyptian people for years to come and thus would have to be addressed by the elected parliament and government.
In view of the Egyptian experience regarding the loan-related conditions imposed by the IMF, “The Popular Campaign to Drop Egypt’s Debts” insistingly rejects obtaining any loan from the IMF and finds it necessary to find alternatives to cover the budget deficit.
“The Popular Campaign to Drop Egypt’s Debts” hereby calls on the interim government to provide the full data regarding the economic conditions of Egypt, including the precise amount of foreign reserve, the budget deficit, the economic bases for obtaining external loans, and the IMF loan-related economic or political conditions.
“The Popular Campaign to Drop Egypt’s Debts” also calls for involving the elected parliament, not SCAF, immediately and without any delay, in reviewing the loan agreement and considering whether to approve it or not. We believe this is the least to be done.