Egypt's Muslim Brotherhood would consider IMF aid

Reuters, Friday 13 Jan 2012

Islamic movement's economists say they might back a condition-free emergency loan but alternatives should be considered first, including repricing gas exports and greater tax-gathering

In the wake of elections, that spurned IMF loan is coming back into the frame (Photo: Reuters)

Egypt's Muslim Brotherhood would consider supporting a deal to obtain emergency aid from the IMF, providing there are no conditions attached and alternatives are explored first, a senior official in the Brotherhood said.

With the risk of a currency crisis simmering in the economic upheaval that has followed President Hosni Mubarak's overthrow last February, the military-backed government is about to start talks with the IMF on an emergency loan package.
"There is no objection to borrowing. But it must be without conditions. And it should be in accordance with national priorities," Ashraf Badr El-Din, the head of the Islamist movement's economic policy committee, told Reuters in an interview on Thursday.
"There are alternatives that the government must resort to first before resorting to the IMF," he said, such as repricing Egypt's gas export agreements, re-examining the use of special government funds, and collecting tax arrears.
The Brotherhood estimates it won about 41 per cent of the seats in elections to the lower house of parliament that are now drawing to a close, making it by far the most powerful political force in the house. So its backing may be needed to keep any IMF deal on track after June, when the military has pledged to hand over power; the IMF has said an aid agreement must have "broad political support" in Egypt.
The IMF said discussions would begin in Cairo on Sunday and a source at the Fund said they would explore the possibility of a $3 billion loan.
Last June, the government rejected the offer of an IMF facility of that size.
IMF aid is sensitive in Egypt because of national pride and because the Fund is expected to ask the government for assurances on curbing state spending - an explosive issue in a country where frustration over poverty has been causing unrest.
Badr El-Din, a member of parliament who was jailed three times because of his political activities under Mubarak's rule, said the Brotherhood had not been discussing the possibility of IMF aid with the government, and did not expect to be kept informed of progress in the talks with the Fund.
The Brotherhood's ambivalent position on IMF aid reflects both its inexperience in handling economic policy - its activities were severely restricted under Mubarak - and the fact that it is not clear how much it will be able to shape policy in the next government.
The military has pledged to hold presidential elections by June, but a new constitution has not yet been drafted so key issues such as the balance of power between the president and parliament have not been decided.
Another senior Brotherhood official, Ahmed Soliman, said his organisation would focus on improving people's living standards so it would be interested in controlling ministries such as health and education. It has not yet decided whether it will seek key macroeconomic policy portfolios such as finance.
However, Soliman said the Brotherhood would participate in major economic decisions affecting the country, and both local and foreign investors are nervous about the impact that the movement, which has championed the cause of Egypt's poorest, could have on the business environment.
In the interview at sparsely furnished Brotherhood offices in a shabby Cairo apartment building, both Badr El-Din and Soliman sought to allay those fears by repeating that the Brotherhood would respect private enterprise and free markets.
The Brotherhood will hold a conference for tour operators on the Red Sea this month to reassure them that the movement will not let its opposition to alcohol and immodest dress hurt tourism, a key earner of foreign exchange, Soliman said.
Badr El-Din said the Brotherhood would not seek to end the Qualifying Industrial Zones (QIZ) agreement under which hundreds of Egyptian companies export products with Israeli components duty-free to the United States. Export volumes have been running at around $800 million annually.
Existing agreements with Israel should be maintained as long as Israel also keeps to their terms, Badr El-Din said.
One of the new government's biggest economic challenges will be trying to shrink a state budget deficit that is officially estimated at 8.6 per cent of gross domestic product this fiscal year, close to Greece's level.
Speaking quietly and deliberately and dressed in a black suit and conservatively patterned tie, Badr El-Din acknowledged the need to cut the deficit but did not give detailed figures to show how that could be reconciled with the Brotherhood's desire to improve conditions for the poor.
"There will be priorities in the first year of parliament, mainly (increasing) the minimum wage and an increase in pensions for the poor, and finding ways to invest local savings," he said.
Badr El-Din said the Brotherhood had 21 suggestions for increasing state funds, including issues of sukuk (Islamic bonds) with face values as small as 100 Egyptian pounds ($17) to attract idle savings.
Another suggestion is for the state to reclaim land that Mubarak's government gave free to businessmen, he said. The current government has already started a similar policy; a minister who heads a committee investigating failures in industry said on Sunday that 2,100 hectares of land had been withdrawn from some of the country's leading businessmen because they failed to develop it.
The Brotherhood may share power in parliament in a coalition with secular parties, many of which are pro-business. It will also have to contend with the Islamist al-Nour party, which takes more hardline religious positions.
Badr El-Din said the Brotherhood had not been holding official talks on economic policy with other parties, but added that there had been some unofficial contacts.
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