Egyptians pay heavy price for IMF loan
The Egyptian government has accepted a $3.2 billion loan from the International Monetary Fund (IMF) in return for a ruthless austerity programme, cuts in food subsidies, the introduction of a sales tax and more privatisation.
These are the same terms that the military turned down last year, saying it would saddle the country with unacceptable repayments for years to come and amounted to a threat to Egypt's national sovereignty.
But the IMF insists that Egypt must cut its budget deficit, and use the same methods as Greece and Britain to do so. Just as elsewhere, their only vision of the future is of the mass of people ground down to keep the capitalist show on the road.
Egypt has a funding gap of around $11bn over the next 18 months and has asked the World Bank for $1 billion, the European Union for $660 million and $500 million each from the African Development Bank and the Arab Monetary Fund, on top of the IMF money.
Without these loans, the economy will collapse and a massive devaluation of the Egyptian pound will let inflation rip. Egypt’s foreign reserves have fallen to around $10 billion as the government spent $26 billion in one year to prop up the currency.
Egypt's loan potential has been assessed by the European Bank for Development and Reconstruction (EBDR), and the whole tone of their report shows the underlying causes of the revolution mean nothing to them and they want to go on promoting the same policies. The EBDR praises the pre-revolutionary period of "comprehensive reform", and talks of the "major success story" of external liberalisation.
The Egyptian Initiative for Personal Rights (EIPR) has analysed the EBDR’S technical assessment and says it "reveals the Bank’s lack of commitment to democracy and development in post-revolutionary Egypt".
Amr Adly, head of the EIPR's Economic and Social Justice Unit says: "The assessment simply ignores the cronyism and corrupt nature of the privatisation process during that period where public assets (state-owned enterprises, public land and even natural resources including fresh water and natural gas) were mainly transferred into the hands of a few cronies who where closely tied to the regime." (Thanks to Platform London for highlighting the EIPR report).
The EBDR's so-called "success story" ignores the mounting poverty, unemployment and economic injustice that set the scene for January 2011 revolution. But the banks' recipe for post-revolutionary Egypt is to go even further down the same road.
Clearly European capitalism believes that recent parliamentary elections in Egypt have produced a government that will toe the austerity line – and they are right. The Muslim Brotherhood has joined with the army and the elite to steal the revolution from the people.
With income from tourism and exports in collapse it seems unlikely that the government will be able to stave off a massive economic crisis and devaluation, allowing inflation to rip.
As the presidential election looms, the Egyptian 99% need to consider whether this is the way to achieve what they sacrificed so much for. The issue of what kind of economy they want will take centre stage alongside what kind of democracy they want.
It is crucial that the advanced forces of the Arab Spring – the youth in particular – prepare plans for an economic transformation that can offer an alternative to putting the country's future into the hands of the banks and the IMF. A future where democratic People's Assemblies take control of the economy and place enterprises, including tourism enterprises, into the ownership of those that work in them is surely the way to go.
It is a co-operative future that takes economic power out of the hands of the corrupt elite, and runs the economy for the benefit of the many not the profit of the few. This is the only way to deliver the economic and social justice the revolution set out to achieve.
8 March 2012