Egypt: Provisional governments should not accept IFIs' conditionalities

Arab Spring at Tahrir Square. (Photo: Jonathan Rashad/ Creative Commons)

Sources: The Guardian, Inter Press Service, ANND's statement.

Egypt's government decided not to borrow from the IMF, and the Arab NGO Network for Development (ANND) warned that conditions attached to lending by development banks --as liberalisation of trade, investment and deregulation advocated by the US and the EU-- had contributed to the current unrest in the Arab world, reported the British newspaper The Guardian. 

"Such conditionalities should not be reinforced through various forms of partnerships and aid packages promoted in the name of democracy support," said a joint statement from 67 civil society groups lead by the ANND. "The path to development of each country should be decided by its own people, via constitutional processes and national dialogue."

The Arab network said if the west really wanted to support the region's democratic movements, it should start by eliminating the conditions attached to aid, assess previous lending by development banks in the region, guarantee full transparency of any new aid, cancel debt taken on by former leaders, and renegotiate international trade and other economic commitments signed by past governments, according to the statement.

"Such decisions should not be taken by provisional governments, mere months, even weeks before elections are held," added the ANND.

Egypt has cancelled plans to borrow 3 billion dollars from the International Monetary Fund (IMF) because of conditions that violated the country’s national sovereignty and a public outcry that warned against terms that were blamed for impoverishing many Egyptians, reported from Cairo Emad Mekay, Inter Press Service news agency journalist an expert on International Financial Institutions (IFIs).

Arab activists warned on Monday 27 June that conditions attached to western aid threatened to undercut the goals of economic and social justice at the heart of the Arab spring, following Egypt's decision to spurn a loan offer from the IMF.

The Egyptian finance minister, Samir Radwan, announced that Egypt would not borrow from the institution after revising its budget and cutting the deficit target from 11% to 8.6% of gross domestic product. The IMF said Egypt had scrapped plans for a three billion dollars loan agreed last month, a move that now calls into question the World Bank's own loan. Radwan said Qatar had provided Egypt with $500m for budgetary support in the past week, and Saudi Arabia had offered a similar amount.

Counter Balance, which monitors the European Investment Bank, argued that western governments tended to confuse the transition to democracy with a transition to liberalisation because it served their interests. "The European Investment Bank, for instance – which will be lending the biggest share of EU money – has been active in the region for 30 years without tangible development results for the people," said the group's Caterina Amicucci.

ANND and its fellows NGOs remembered that as late as September 2010 the IMF was still praising Tunisia's "sound macroeconomic management and structural reforms over the last decade", and was calling for more of the same by restraining public spending on wages and food and fuel subsidies.

"Those same economic models are now being promoted, as if nothing happened, via the conditionalities attached to the new aid package," the Arab network said.

According to several Egyptian newspapers, General Sameh Sadeq, member of the country’s ruling military council, said the country turned down the loans, and those under discussion with the World Bank, because there were "five conditions that totally went against the principles of national sovereignty." Gen. Sadeq didn’t detail what these conditions were. 

The IMF loan would have made Egypt the first recipient of funding in the Middle East since the so-called Arab Spring movement against Western-backed dictatorships began late last year, reported IPS. 

The Finance Ministry has reluctantly backed down from its loans decision and said in a statement on its website that the measure to reject the loans came in response to "public debate and to consultations with the Supreme Council of the Armed Forces," according to Mekay's article. 

The move to borrow by the Sharaf government was surprising because it has been appointed as caretaker for less than six months and is widely believed to lack enough delegation from the Egyptian people, observed the journalist. A host of columnists rebuked the government for taking such major decision without representation from the Egyptian people. 

It is not yet clear now if Egypt’s decision might influence plans by other countries in the region to borrow, he concluded.