Egypt strikes $3bn IMF deal to ‘relaunch’ economy

Negotiations conclude after IMF praises country’s new budget, which transitional rulers say will help improve social justice Egypt’s interim government has agreed a $3bn loan package with the International Monetary Fund to help stabilise the country’s finances during the post-Mubarak transition period. The deal was hailed by the Egyptian finance minister as a “fund to relaunch the Egyptian economy” and a first step towards tackling a national budget deficit that has escalated sharply in the aftermath of this year’s political upheaval. US President Barack Obama has also promised Egypt $1bn in loan guarantees as well as a further $1bn of debt cancellation. French leader Nicolas Sarkozy has said the G8 will provide up to $10bn in direct aid to both Egypt and Tunisia, a figure likely to be matched by oil-exporting countries in the Gulf. Negotiations for the 12-month loan concluded just days after the IMF praised a new budget in Egypt which raised government spending by a quarter. The country’s transitional rulers claim the budget will help improve social justice and remedy some of the grievances that helped inspire the anti-government uprising in January. Some Egyptian business leaders have voiced opposition to the new policies, which include the raising of the national minimum wage from the near three-decades old level of 34 Egyptian pounds (£3.50) per month to 700 Egyptian pounds, and the establishment of a 2bn Egyptian pounds fund to pay for unemployment benefits. The IMF, however, argued that the package put the Egyptian economy back on the right track. “Following a revolution and during a challenging period of political transition, the Egyptian authorities have put in place a homegrown economic programme with the over-arching objective of social justice,” Ratna Sahay, deputy director of the IMF’s Middle East and Central Asia Department, said last week. The IMF’s latest overtures have been met with criticism elsewhere in Egypt, where the Mubarak regime’s neo-liberal reforms were widely applauded by the global financial community despite contributing to a growing chasm between rich and poor. Since the last major IMF injection of funds into the country in 1991, which was accompanied by a strict “structural adjustment programme”, the percentage of the population living below $2 a day has doubled. Over the past decade, when GDP growth rates were at their highest, levels of absolute poverty – the international measure used to describe much of the poverty in the third world – have climbed from 16.7% to almost 20%. The IMF has also been criticised for its record of issuing favourable reports about the progress of autocratic north African governments just days or weeks before they experienced widespread revolts. An IMF evaluation of Tunisia’s dictatorship in September 2010 praised its “sound macroeconomic management and structural reforms over the last decade” just three months before President Ben Ali was toppled by protests. IMF Reports in February this year noted the Mubarak regime’s “sound fiscal management” in Egypt and stated that the “outlook for Libya’s economy remains stable”. Days later Mubarak was ousted and Libya was engulfed in anti-Gaddafi demonstrations. Meanwhile, Egypt’s former finance minister Youssef Boutros-Ghali has been found guilty of profiteering and abusing state and private assets. Boutros-Ghali, who instituted a flat-rate income tax of 20% and fled abroad during the uprising, was sentenced in absentia to 30 years in jail. The IMF previously described Boutros-Ghali’s policies as “impressive” and praised his stewardship of “one of the Middle East’s fastest-growing economies”. Egypt Arab and Middle East unrest Middle East IMF Africa Economics Global economy Jack Shenker guardian.co.uk

Posted by on June 5, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.