Protests against conditions and usury.
The Egyptian government has announced it is in negotiations with the IMF on a $4.8 billion loan. The loan is likely to be disbursed over two years, with the loan having to be fully repaid over the following five years. Discussions on a $3 billion loan earlier in the year collapsed after being opposed by Islamic parties within the Egyptian parliament. President Mohammed Morsi is now said to be in favour.
IMF Managing Director Christine Lagarde held negotiations with the Egyptian government in the middle of August. It is not yet known what economic conditions the IMF will set on loan disbursements.
The Egyptian government’s external debt payments are thought to be around $3 billion a year; effectively all of the IMF loan would be used to meet debt payments as they come due. It would recycle some of the Mubarak regime debt inherited by the Egyptian people into debt owed to the IMF.
Amr Adly from the Egyptian Initiative for Personal Rights said:
“Many fear that a new era of dependency will start, even after the revolution. The IMF loan won’t be approved without giving concessions that completely contradict the promises of a new development model, and thus undermine the potential for social justice measures after the revolution.”
On 29 August there was a protest in Cairo against the loan. The loan has also been opposed by some Islamic groups, saying the interest charged is usury, and therefore against the Prophet’s teaching.
Since the revolution began, Egypt’s foreign reserves have halved, as income from tourists, and foreign investment, has declined. With falling exports, the government has resorted to using reserves to meet foreign debt payments and maintain the value of the Egyptian pound (effectively using reserves to fund imports). Whilst in 2010 the Egyptian government’s foreign debt payments were a relatively small (in comparison with other countries) 5 per cent of government revenue, its financial position has markedly deteriorated since.