IN EGYPT, IMF MONEY TO FLOW AS AUSTERITY BITES economy. Critics of the deal are not standing idly by. Ali Ayoub, a lawyer based in Cairo, will challenge the IMF deal in the courts. He filed a lawsuit at the administrative court in Cairo challenging the agreement on November 15.“ This deal is against the Egyptian constitution, specifically articles 101 and 127, which clearly say that such agreements must be presented by the government to parliament, which was never done,” Mr Ayoub says.
“ There is no plan for this money, there are no new economic programmes, no projects to support the economy – this money will just be used to pay off the debts to the foreign oil companies. Parliament should have a say over this.”
Ms al-Laithy at Cairo University concurs that information on the government’ s plans for the IMF funds remain thin.“ We are not yet sure exactly how the money will be spent, but much of it will likely go towards servicing other debts. I do not anticipate that it will go towards supporting the productive sectors of the economy at all,” she says. The new fiscal programme includes a commitment that an additional one percent of GDP be allocated for protecting the poorest citizens from rising inflation, which in August reached north of 15 percent. So far it is unclear how this might be implemented.
The ministry of international cooperation has already announced that in addition to the IMF loans, Egypt is seeking $ 800m in loans from European Union member states to support poverty alleviation.
Some are concerned that the government will repeat patterns of taking on debt with little trickle down effect into the rest of the economy.“ We are going to get loans from everywhere. Maybe the interest rate is a bit lower in this case but in the end it will evaporate like all the other loans we ' ve had without improvements in living standards,” says Ms al-Laithy.
There are already signs of popular unrest prompted by the knock on effects of austerity. On October 18, large protests were held in Port Said condemning rent hikes and shortages of state-subsidised baby formula. In Alexandria, taxi driver Ashraf Shahin protested rising living costs before setting himself on fire in front of a military club. He later died of his wounds.
On the day the IMF agreement was approved S & P upgraded its outlook on Egypt from negative to stable. Should fiscal austerity take further tolls, however, the assessments of distant ratings agencies will provide scant protection for the poor against destitution and for the regime against popular anger.
“ What Egypt really needs is investment in the productive sectors of the economy, in education, and in health, not loan repayments on imports – this is just a kind of aspirin approach,” says Ms al-Laithy.“ I can ' t see any chance that the funds will be spent on improving education, health, or the productive sector,” she concludes. – This report is by ThisIsAfrica
ON THE DAY THE IMF AGREEMENT WAS APPROVED S & P UPGRADED ITS OUTLOOK ON EGYPT FROM NEGATIVE TO STABLE
2016 | Business Times Africa 47