Political groups and figures send letter to Egypt's president rejecting IMF loan, reform policies

Ahram Online , Sunday 14 Aug 2016

In a letter signed Sunday, political groups and figures called on Abdel-Fattah El-Sisi to block any IMF loan deal, saying its terms will exacerbate Egypt's crisis and saddle it with unsustainable debt

A letter by a number of political groups and figures was sent to Egypt's President Abdel-Fattah El-Sisi Sunday rejecting the International Monetary Fund (IMF) loan and expressing concern over the "severe financial and economic measures" entailed, the Karama Party announced Sunday.

Egypt and the IMF reached Thursday a staff-level agreement on a $12 billion fund facility over three years that is expected to be approved by the fund's executive board in the coming weeks.

The letter was signed by five parties, including Al-Karama Party and the Popular Current, four non-governmental organisations, among them Egyptians Against Religious Discrimination, and tens of public figures and unionists, including Press Syndicate board member Khaled El-Balshy and former MP and member of the Egyptian Socialist Democratic Party Zyad Elelaimy.

The signatories, dubbing themselves Egypt's "national forces," slammed the IMF loan arguing that it will lead to the "country's economic doom," calling on the president to halt any deal with the IMF and instead implement a "national programme for economic reform."

The suggested programme includes "fiscal reform, ending privatisation, developing a social safety net for the impoverished, reducing government spending on luxury products and judges' salaries, and countering monopolies and corruption," according to the letter.

The path the government took by choosing the IMF loan, the letter said, was "based solely on the recommendations of the IMF," adding that lessons learnt from Mexico, Greece among other states proved that "IMF recommendations would only deepen the country's crisis."

Egypt's finance minister, Amr El-Garhy, refuted in July reports that the IMF imposed any preconditions on Egypt to provide the loan, adding that IMF negotiations are within the framework of the government reform programme.

Since July 2014, Egypt has embarked on a fiscal reform programme in an attempt to curb the growing state budget deficit, estimated at 11.5 percent of GDP in 2015/16, including cutting subsidies and the introduction of new taxes, including VAT planned for implementation in September.

The government decided to slash its total subsidy bill in the current 2016/17 budget, which began in July, by 14 percent compared to the last fiscal year’s bill, estimated at EGP 154 billion.

Egypt's central bank already devalued the local currency by 13.5 percent to register EGP 8.78 to the dollar in mid-March. 

The bank's governor, Tarek Amer defended last week Egypt’s economic reform programme saying it will help to ease current price hikes and mitigate exchange rate pressures.

Announcing the initial loan agreement with Egypt, the IMF's statement described Egypt's reform programme as one that "aims to improve the functioning of the foreign exchange markets, bring down the budget deficit and government debt, and to raise growth and create jobs, especially for women and young people. It also aims to strengthen the social safety net to protect the vulnerable during the process of adjustment."

The letter signed by political groups and figures Sunday criticised the undertaken reform policies, including currency devaluation and value-added tax draft law, adding that "negotiations with the IMF were undertaken without presenting it to the people including its unions, syndicates and political powers."

The signatories of the letter expressed their concern about the "unprecedented increase of public debt" after this deal, particularly with the "current decline of foreign investments, tourism and foreign reserves."

These undertaken policies, the letter says, would cause the country to fall into massive debt and lose its autonomy and political independence.

The letter also demanded that all measures are taken to allow "a state of political openness" and the release all political prisoners.

Since the 2011 revolution, Egypt has suffered from a turbulent economy and political turmoil, scaring off investors and tourists.

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