A New IMF Loan for Egypt?

With the IMF set to go ahead in providing Egypt a $3.2 billion loan, it is time to remind ourselves of the consequences of the last influx of money for Egypt, to ensure that there is full transparency and accountability. However, Egypt has not yet recovered from the damage of the last IMF loan and the country is in great need for transitional justice measures, resulting from stream of corruption prevalent in the last administration, made possible by foreign investment.

For instance, the previous influx of money invested in Egypt from the European Investment Bank was siphoned straight into private-equity funds, partially owned by the sons of former President Husni Mubarak. Two EFG Hermes private equity funds, the Horus Private Equity Funds II and III, were embroiled in land privatization deals in 2007 through one of their investments. In 2007, Mubarak’s executive branch illegally awarded Talaat Mustafa Group 33 million square meters of land for the country’s largest housing project, the Madinaty project, on Cairo`s outskirts, for a fraction of its worth. The land sale eventually was annulled by the courts in September 2010, yet has overturned, and former housing minister Ahmed El Maghraby has been convicted of corruption in connection with the case.

Similarly notorious property deals have involved misuse of public funds, as in the Palm Hills deal. In that instance, the then minister himself signed a property sale to the Palm Hills Developments company in which he actually held a stake through another entity. Present World Bank- and IMF-funded projects also come under the umbrella of the infamous Cairo 2050 Plan, widely criticized for its potential in bringing about grand-scale housing and land rights violations for impoverished urban inhabitants.

The IMF financing now under discussion is the same loan that the Supreme Council of the Armed Forces (SCAF) rejected in June 2011 due to the “conditionalities” attached to it. However, the World Bank maintains that these conditions were insisting on transparency and social-accountability measures. However, traditionally, conditions for the loan include a slash in the state’s social spending and other neoliberal economic reforms.

Many have objected to this loan from across society and government. On 25 April, just six out of 360 Egyptian MPs voted to cut state spending, complicating the government’s economic-reform plans. This reluctance to cut spending further is seen against the background of a massive drop in public spending under the Mubarak regime. Between 2002 and 2007, real government investment dropped by 36%. The Popular Campaign to Drop Egypt’s Debts (PCDED) claims new plans aimed at cutting the country`s public debt, in order to secure the loan, ignore long-held demands for social justice and actually will increase already-grinding poverty in rural areas. This is due to planned additional taxes on agricultural land without an increase in subsidies to farmers.

Predictions on the future of IMF investment in Egypt are conflicting. This month, Governor Farūq al-`Uqda of the Central Bank resumed talks with officials of the IMF in Washington. However, he has denied these talks ever took place. Views toward the loan differ among various political fractions and forces currently fighting for influence in these decision-making processes. In any case, Egypt is bound under existing treaty law obligations to prioritize human rights and social justice in the ongoing discussions surrounding the loan.