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IMF meets Muslim Brotherhood, mulls billions in loan to Egypt

A delegation from the International Monetary Fund concluded its visit to Egypt, where it assessed whether or not the country is ready to take on billions in international loans.
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An Egyptian woman sells clothes on the side of a road in Cairo. Some 40 percent of Egyptians live on less than $2 per day, the World Bank says. (MAHMUD HAMS/AFP/Getty Images)

Egypt's ruling generals have asked the International Monetary Fund (IMF), a global financial body, for $3.2 billion in aid to prop up the country's ailing, post-uprising economy.

The military rejected IMF assistance after assuming power last year, in a move that made the debate over loans as much about politics and military hubris as economic woes.

When the IMF offered $5.2 billion in assistance funds in Jun. 2011, Egypt's military, ruling as the Supreme Council of Armed Forces (SCAF), rejected the proposal it said would be substituted with local borrowing and aid from Gulf states.

But others here say SCAF was too proud, too arrogant, to take the funds as it forged its image as guardians of the revolution and saviors of an Egypt targeted by "foreign elements." 

"One of the major mistakes they [the army] have made is rejecting the IMF loan" in June, said Hisham Kassem, longtime opposition activist and founder of Egypt's first independent newspaper, Al-Masry Al-Youm.

"They turned down the initial loan on grounds of vanity. They simply said: we will not, during our tenure of running the country, take loans from the IMF. It was not based on sound economic advice."   

More from GlobalPost: Can the Muslim Brotherhood fix Egypt's economy?

But now SCAF is singing a different tune, as political instability has all but halted foreign investment, and the government burns through billions in foreign currency reserves (the government has spent an average of $2 billion of its currency reserves per month over the past year). 

The package, which will reportedly be approved without conditions, would help reduce the budget deficit and spur further investment from abroad. 

"There is no money, no work," said an elderly Cairo woman, but who did not want to give her name. "My son works in the tourism industry, but there is no work. May God save this country." 

But there is also anger over the IMF negotiations with an unelected, non-civilian government that has failed to articulate a comprehensive economic vision and presided over a repressive transition to democratic rule. 

To its credit, the IMF delegation sent to Egypt - and which departed yesterday - met with leaders of the Muslim Brotherhood's Freedom and Justice Party, whose candidates just won a near majority in parliament, to discuss assistance and economic policy. 

Some saw it as a sign that the IMF preferred not to negotiate with the generals, instead ensuring the assistance had broad and legitimate political support. IMF officials told Reuters news agency that the negotiations over the loan could take as long as 2-3 months. The army has pledged to hand power over to an elected civilian president by Jun. 30, 2012. 

Still, IMF loans are not without their problems. 

Rumors that the aid package would require the government to cut fuel and other subsidies sparked a country-wide gas crisis, where at least 40 percent of the population lives under $2 per day. Locals hoarded fuel and long lines of frustrated drivers at petrol stations have already spiraled into violent clashes

More from GlobalPost: Egypt's fuel shortages cause panic, hoarding

While the consensus among economists and analysts here is that accepting IMF help is a good thing, scathing critiques of such assistance also shed light on how the aid packages can hurt the poor. And in Egypt, unfortunately, there are many. 

http://www.globalpost.com/http://www.globalpost.com/dispatches/globalpost-blogs/the-casbah/egypt-imf-loan-military-muslim-brotherhood

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