Why Egypt Ditched the IMF by Mark Engler

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Peace & Justice  |  After Empire  |  People Power

Why Egypt Ditched the IMF

As Egyptians continue their struggle for social justice and full democracy, there's one institution they don't want involved: the International Monetary Fund.

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by Mark Engler

posted Jul 15, 2011

Photo by Jonathan Rashad

On Friday, crowds of protesters returned to Cairo’s Tahrir Square, with independent trade unions calling for the country’s yet-unfinished revolution to continue. The unionists, according to Ahram Online, “stressed the need to achieve social justice, the prosecution of all corrupt figures of the old regime, and the establishment of a full democracy.”

That activists are keeping up street pressure for democratic reforms is a positive sign. And it follows on the heels of another one: the recent, surprise decision by the country’s interim leaders to spurn the International Monetary Fund.

IMF economic “guidance” is not new to Egypt, but a hallmark of the Mubarak dictatorship. It is to their credit that Egyptians have thus far chosen to break with this past.

In late June, the BBC reported, “Egypt drop[ped] plans for [an] IMF loan amid popular distrust.” Despite the IMF’s insistence that it was offering financing on favorable terms, the story noted, “many Egyptians were unhappy, feeling it was a betrayal of the protest movement that had denounced the IMF as a tool of imperialism.”

From the beginning of the Arab Spring revolts, many progressive commentators have expressed concern that people in countries such as Egypt and Tunisia might win greater political freedoms but would have their nations’ economic policies hijacked by the international financial institutions. Walden Bello, for one, reflected on pro-democracy transitions in the Philippines, Latin America, and Eastern Europe, and bemoaned a sad pattern:

Even as traditional elites hijacked the resurgent parliamentary systems, the United States and the multilateral agencies subverted them to push through austerity programs that the authoritarian regimes they previously supported had no longer been able to impose on recalcitrant citizenries. It soon became clear that Washington and the multilateral agencies wanted the new democratic regimes to use their legitimacy to impose repressive economic adjustment programs and debt management policies.

In the past decade and a half, as the terrible economic track record of IMF-imposed structural adjustment in the 1980s and ’90s has come to light, neoliberal economic policies have come under assault, and the IMF’s power has substantially diminished. This was especially true prior to the major economic downturn that started in 2008, which, ironically, gave the fund something of a new lease on life. (Ironically, because drives for deregulation promoted by Washington Consensus economists did plenty to spur the crisis in the first place.)

The IMF has by now recognized that attaching neoliberal conditions to loans to Egypt would result in a lot of political flak. It went as far as to claim that it was pursuing a “no strings attached” approach this time. Ratna Sahay, Deputy Director of the IMF’s Middle East and Central Asia Department, stated:

No, nothing was hidden or kept quiet....The Egyptian authorities designed their own program with explicit policies and measures. The IMF arrangement included a number of benchmarks, which consisted of measures that were already in the government’s economic plan, none of them related to privatization or requiring changes to the subsidy regime during the period of IMF arrangement. In fact, we fully agreed with the authorities’ objective of promoting social justice and increasing transparency during this historical transition.

Such reassurances are signs of progress, and in part they are the product of several decades of progressive campaigning against neoliberal “conditionality.” Yet many other indications suggest that Egyptians are still right to be wary.

In late May, the New York Times ran a story by Liz Alderman entitled, “Aid Pledge by Group of 8 Seeks to Bolster Arab Democracy.” Despite the friendly sounding headline, there were troubling passages deep in the article, such as this:

Officials cautioned that the projected $20 billion in aid from international financial institutions would come in phases and be contingent on democratic and economic reforms. The pledge, an aide to President Obama said, was “not a blank check” but “an envelope that could be achieved in the context of suitable reform efforts.”

And:

The Group of 8 leaders want their aid to help...by broadening economic opportunity and breaking down trade barriers; Egypt, seeking to protect state industries, has some of the highest in the world.

While the story was not an editorial, but ostensibly a straight news report, it included some loaded paragraphs. Alderman wrote, for example:

Old leftist political parties are re-emerging as though they have been frozen in time for the 30 years of the Mubarak police state to demand that the government again expand its role in the economy to help the poor, even at the price of discouraging foreign investors.

Why We Revolt

When and how does the moment come when people stop believing in the power that has ruled them?

Yes, the idea that government might conceive of its role as having something to do with helping the poor (gasp!), rather than courting or bailing out international investors, is a notion that has been relegated to the trash heap of history by all sensible reporters.

Without question, the economic difficulties that the next government in Egypt will face are profound. Yet, as those who have examined the history in more detail—such as Adam Hanieh of the School of Oriental and African Studies (SOAS)—have remarked, Western aid and IMF economic “guidance” are not new to Egypt. They were hallmarks of the Mubarak dictatorship. It is to their credit that Egyptians have thus far chosen to break with this past.

Mark Engler is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, 2008). He can be reached via DemocracyUprising.com. He is a contributor to Dissent Magazine, where this article originally appeared.

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YES! Magazine encourages you to make free use of this article by taking these easy steps. Engler, M. (2011, July 14). Why Egypt Ditched the IMF. Retrieved July 18, 2011, from YES! Magazine Web site: http://www.yesmagazine.org/peace-justice/why-egypt-ditched-the-imf.> This work is licensed under a Creative Commons License

Reader Comments

egypt regects funds from the IMF

Posted by roseann divicino at Jul 17, 2011 05:45 AM

Kudos Egypt for having the smarts to not take the money. They dangle the carrot then they own you. As they do in all countries during a "disaster"they offer the $, steal your natural resources,open the borders to multi-national corps,screw all local workers and put the country in greater peril then it has ever been.

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