On Wednesday August 22nd Christine Lagarde, IMF head, met Egyptian Prime Minister Hisham Qandi and President Mohammed Mursi. Lagarde stressed the need for a reform program to solve the economic crisis in the country. Egypt is seeking a loan now from the IMF after claiming in June 2011 that it did not need one.
The prime minister Qand
“The loan in general terms is worth 3.2 billion U.S. dollars. We talked about increasing it up to probably 4.8 and maybe more.” Lagarde
said the amount of the loan had not been settled. Qandi said that Egypt hoped to sign a deal by the end of 2012. The interest rate would be 1.1% and would be payable over five years with a 39 month grace period. Qandi continued:
“This high level visit by the IMF which comes very quickly after new government formation sends a positive message not only to Egypt but to the whole world that Egypt is stable and the Egyptian economy is headed for recovery. We will agree on a timeline and road map that will see a loan agreement signed by November or early December. The government has decided to seek foreign borrowing and the IMF conditions are acceptable to us,”
In spite of the fact that the Islamist Freedom and Justice Party had earlier rejected an economic program associated with an earlier loan of $3.2 billion it appears to welcome this loan. Quandi claims t
hat Egypt will have final say as to how the money will be spent.
A presidential spokesperson praised the IMF and said that a democratic transition would need the support of international institutions such as the IMF. Yasser Ali the spokesperson said that the IMF was not just a funding institution but also encouraged investor confidence in the economy and foreign investment. The conditions for the loan will be discussed in later negotiations. Quite often the conditions are those promoting the global neoliberal agenda including selling off state assets, removal of state subsidies, and cutting back on entitlement programs.
Lagarde naturally put a positive spin on everything saying that the IMF would be Egypt's partner in a journey to restore stability, boost investor confidence, and create jobs. However she also warned that fiscal, monetary, and structural reforms would require determination and political courage. Many of these reforms will be politically unpopular and may help boost opposition parties in the polls.
massed near the headquarters of the cabinet to protest Lagarde's visit. They condemned the IMF conditions for loans that the protesters claimed benefit only businessmen. They blame the IMF and the World Bank for privatization programs that were carried out under the Mubarak regime. No doubt there will be more of the same. Mursi's economic views are basically neo-liberal and for that reason he is supported by a number of U.S. officials and others in spite of his Islamist views and links to the Muslim Brotherhood.