CAIRO, EGYPT–(Marketwired – May 14, 2013) -
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The IMF is very interested in spreading its money and influence in Egypt, but concerns remain over US-style policies and Morsi’s legitimacy
Egypt is on the front line in the International Monetary Fund’s battle to remain relevant despite the rapidly shifting balance of power in the 21st century global economy. IMF officials are in Cairo, haggling with the Muslim Brotherhood government about the conditions of a proposed $4.8bn loan.
During the eurozone crisis, the IMF has frequently been regarded as a voice of reason, forcing Europe’s policymakers to face up to the scale of the financial disaster. But many ordinary Egyptians see the Washington-based institution as a stalking horse for the US-backed policies they sought to overthrow by occupying Cairo’s Tahrir Square during the Arab spring. Abolishing costly food and fuel subsidies is on the IMF agenda, for example – a controversial issue in a country with a history of “bread riots”.
Egypt desperately needs cash. Its foreign currency reserves are running low and it risks being unable to afford essential fuel and food imports. But some campaigners argue that the tax rises and subsidy cuts the government is negotiating with the IMF in return for a loan are strikingly similar to reforms drawn up by the reviled Mubarak regime.
IMF managing director Christine Lagarde said earlier this year: “The IMF needs to have the commitment of the political authorities that can actually endorse the programme, own it, and propose it to the population as theirs.”
But Mohga Kamal-Yanni, an expert on Egypt at Oxfam, disagrees: “The IMF prescription for the Egyptian economy is going to be really, really damaging. They don’t want to accept that there are other ways to raise government income.”
She argues that the cash squeeze is being caused by the fragile legitimacy of new president Mohamed Morsi, with the associated turmoil unsettling investors and markets. The IMF blames the crisis on the economic situation, she says, but it’s actually caused by the political situation. Egypt’s allies, including Qatar, have come to its aid with bilateral loans.
However, Sargon Nissan of the Bretton Woods Project thinktank says the IMF is determined to extend its reach in the countries where the Arab spring has brought democracy. “The IMF is desperate to lend to them,” he says. “Europe is a quagmire; eastern Europe is not a good place to lend; and the Middle East is a hugely significant region, in which the IMF’s major sponsor, the US, has major geopolitical interests. The IMF is very clearly prioritising support for this region, and Egypt is the key country.”
He argues that the IMF should be cautious about entering talks with a regime whose legitimacy has been widely questioned since Morsi granted himself sweeping new powers last year. These powers were later repealed, but elections under a new constitution are not due until later this year.
“The really disturbing thing is that they’re willing to work in Egypt and in a number of the transitional countries without those countries necessarily having a sufficient democratic mandate,” he says. He says the IMF should instead be making a short-term, emergency loan, with few conditions – an option the Egyptian government declined in 2011.
Conflict over religion and identity risks diverting attention from the battle for social justice and national independence
From the first eruption of the Arab revolutions in Tunisia, it was clear that powerful forces would do everything possible to make sure they were brought to heel, or failed. Those included domestic interests which had lost out from the overthrow of the old regimes, Gulf states that feared the contagion would spread to their shores and western powers that had lost strategic clients – and didn’t like the idea of losing any more.
So after Tunisia and Egypt had fallen in quick succession, later uprisings were hijacked, as in Libya, or crushed, as in Bahrain, while sectarian toxins were pumped throughout the region, escalating the bloodshed in Syria in particular, and cash was poured into destabilising or co-opting the post-revolutionary states.
It seemed only Tunisia was small and homogenous enough to be spared a full-scale counter-revolutionary onslaught, its newly elected Islamist leaders pluralist enough to lead a successful democratisation and offer a progressive model for the rest of the region.
That was until the assassination of the leftist leader Chokri Belaïd in February brought to a head a rising tide of conflict between secular groups and Islamists (punctuated with a few violent incidents involving extreme Salafists). Whoever ordered the killing, which provoked large-scale protests, riots and demands for the dissolution of parliament and the overthrow of the government, was clearly out to destabilise the country.
Two months on, and Tunis has just hosted tens of thousands of international activists for the World Social Forum, first launched in Brazil 12 years ago to challenge corporate globalisation, with the aim of supporting radical change in North Africa and across the world.
For all the reports of insecurity, they found a city now strikingly calm and unthreatening, with Salafist fundamentalists thin on the ground and vibrant networks of social movements, trade unionism and protest campaigns. But the crisis of unemployment and poverty that sparked the Tunisian uprising is now worse than in 2010, and corruption in the police and bureaucracy remains dire.
Meanwhile, politics has become increasingly polarised around a dysfunctional standoff over religion and secularism: between the centrist Islamist Ennahda party – which was the main target for violent repression under Ben Ali’s dictatorship and won the 2011 elections – and opposition parties, both right and left, which accuse Ennahda of
US Secretary of State set to urge bickering leaders to end the political chaos that is blocking a large international loan
US Secretary of State John Kerry is calling on Egyptian leaders and opposition politicians to forge a political consensus that will allow the country to emerge from economic crisis. Kerry, who is on his first overseas trip as a member of Barack Obama’s cabinet, was scheduled to meet a number of opposition figures and Egypt’s foreign minister on Saturday. He will see President Mohammed Morsi on Sunday.
US officials said Kerry was particularly concerned that Egypt should make the reforms necessary to qualify for a $4.8bn International Monetary Fund loan package. One official said it was extremely important for the new Egypt for there to be a firm economic foundation, which required reaching agreement with the IMF. To get that Egypt must make reforms, like increasing tax collections and curbing energy subsidies.
Agreement with the IMF would also unlock significant US assistance, including portions of the $1bn that president Obama pledged last April. Getting the IMF deal will also be contingent on an end to the political chaos that has wracked the country since Morsi’s election. Kerry will press for all political players to come to a basic agreement on the country’s direction ahead of parliamentary elections that begin in April, the official said.
Liberal and secular Egyptians have complained that Washington is siding with Morsi’s ruling Muslim Brotherhood. The main opposition group, the National Salvation Front, has said it will boycott the upcoming elections. The US official said Kerry would not tell the front what to do, but would stress that they should participate if they want their ideas and values heard and represented. At the same time, the official said Kerry would impress on Morsi the need for inclusiveness and tolerance.
The visit by the US state secretary was marked by protest on Saturday. In Cairo’s Tahrir Square, a small group of anti-Morsi demonstrators held banners reading: “Kerry – member of the Brotherhood” and “Kerry, you are not welcome here”. The protests in the capital were largely peaceful. However, unrelated demonstrations Saturday in the Nile Delta city of Mansoura saw clashes in which at least one person died. Meanwhile in Port Said, a mob torched a police station, according to security sources.
Egypt has been locked in political crisis for months, amid waves of protests against Morsi that have repeatedly turned into deadly clashes and rioting. The opposition accuses the president and the Brotherhood, from which he hails, of dominating power in Egypt, effectively stepping in to the same role as the ousted autocrat Hosni Mubarak and failing to carry out reforms while seeking to instill a more religiously conservative system. Morsi’s administration and the Brotherhood say their opponents are trying to use street unrest to overturn their rule.
Kerry’s visit to Egypt is the sixth leg of a nine-nation dash through Europe and the Middle East. He will travel next to Saudi Arabia, the United Arab Emirates and Qatar.
Category : World News
Egypt will soon resume talks with the International Monetary Fund over a crucial $4.8bn (£3bn) loan to shore up the economy, the prime minister says, as the currency weakens further.
The rest is here: Egypt hopeful on IMF loan talks
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Egypt referendum: President Morsi backers urge unity
BBC News Backers of President Mohammed Morsi have urged all Egyptians to work together after the adoption of a controversial new constitution. Muslim Brotherhood leader Mohamed Badie said Egyptians should “begin building our country's rebirth with free will… Egypt Voters Approve Constitution Egypt's constitution passes Morsy signs Egypt's constitution into law
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