Cairo: Don’t pay the debt. This is the advice some British and Brazilian experts gave their Egyptian counterparts as a way of radically changing the country’s economic policies.
Turning a new page in Egypt’s present and future requires a serious look into its past, cleaning its closet of skeletons that could came back to haunt it. One of these skeletons is the debt and its accumulated interest rate over the years.
According to Prime Minister Hisham Qandil, Egypt’s domestic debt amounts to LE 1.18 trillion ($174 billion) and its foreign debt $33.8 billion. According to a report by the Ministry of Finance, domestic debt amounts to 70 and 15.2 percent of GDP, respectively.
Efforts like the Popular Campaign to Drop Egypt Debts want to reinvestigate the debt to determine the illegitimate loans administrated by the ousted regime. Speaking to a group of activists, politicians and journalists last Saturday in Cairo, Maria Lucia Fattorelli described the process of investigating illegitimate loans in South America. The activist, a member of the Citizen Debt Audit in Brazil, specifically cited Ecuador, which in 2008 defaulted on its debts and successfully renegotiated with over 90 percent of its creditors to repay only 30 percent of the debt. An official query had earlier ruled much of the debt was odious.
The advice, which was echoed by European economic experts and activists at the same conference, comes at a time when the Egyptian government is negotiating a new loan by the International Monetary Fund and when many don’t want the country to be saddled with new debts.
The resumption of the IMF loan negotiations forces a thorough assessment of Egypt’s past – even though some urge Egyptians to focus solely on the future. An investigation of the economic policies of the Mubarak regime, which acquired loans and accumulated debt, is vital in drafting the current and future economic approach in which the IMF loan would fit.
For now, Egypt’s future is in the hands of the Muslim Brotherhood, to which President Mohamed Morsi is affiliated and which dominated the elections of the now dissolved parliament.
Before and during elections, the MB had presented a vision not much different from that of the ousted regime – minus the corruption. The steady rise of the Islamist group over the past 19 months was assuring to investors and economic experts, who saw possible economic stability on the long term as opposed to the political mêlée that marked the military-managed transition.
This continuation is troubling to some activists and leftist economic experts inside Egypt, who instead want a complete overhaul of the economic policy. The focus on attracting foreign investments, the rampant privatization, the emphasis on protecting business owners with little or no attention to workers, and the obsession with numerical economic indicators that don’t translate to popular economic growth are some of the things many expected to change.
Transparency is also high on the list. The IMF loan was increased from $3.2 billion to $4.8 billion. The reasons that delayed and at some point halted the negotiations remain intact. The lack of a clear plan on where the money would be spent, the lack of transparency regarding the exact conditions required by the IMF, and the lack of serious studies about alternatives to the loan remain an unchanging reality.
The MB MPs and leaders pointed to these exact three points when they refused to approve the loan in parliament earlier this year. Now under Morsi’s leadership, the government still hasn’t changed its position. In fact, the national budget, which was prepared by a cabinet heavily criticized by the MB, hasn’t been modified.
With an eye on the European financial crisis, the unrest in Greece and the ongoing debate about the role of the IMF, especially in emerging markets or when helping states in crises, Egyptian activists are more skeptical about the IMF loan than the MB once was.
Experts and groups advocating social and economic rights rebuff claims that Egypt desperately needs the cash, saying officials have been saying the same for 19 months without presenting convincing numbers to prove it. They also refuse as baseless arguments that taking the loan would be a sign that Egypt’s economy is recovering and would encourage investors to come to Egypt. They also don’t believe what officials keep repeating about the non-existence of conditions.
The association with the IMF isn’t helping the loan debate. The IMF, along with other international financial institutions, had supported the policies of the former regime. These policies fueled injustice that eventually translated to an uprising.
The quick fix that the loan would presumably provide is perceived as a lazy and temporary solution, which ignores the core problems of the economy and its failure to benefit the majority of Egyptians.
Instead of auditing its previous debts as part of a review of economic policies, Egypt is retaking the same road. Speaking to the Cairo conference, Nick Dearden, director of the Jubilee Debt Campaign, urged the audience to work on changing the economy. Like Egyptians inspired the protest action across the globe last year, he said, they’ll find support for their renewed efforts to change the status quo.