The Egyptian government is still seeking the approval of Egypt's political parties over the long-awaited $4.8 billion loan from the International Monetary Fund (IMF), which is expected to ease the budget deficit in the coming fiscal year 2013/14.
The ongoing lack of consensus among political parties could be a stumbling block, as the IMF has made it clear that it requires broad social and political support for the economic reform plan put forward by Egypt as a condition for obtaining the loan.
Support from opposition parties, even if it comes in a shy manner, means that the Egyptian government will be more able in implementing its economic programme, which includes many unpopular measures.
Egypt's economic plan, presented to the IMF last month, involves slashing subsidies and raising taxes in order to curb the budget deficit. Since December 2012, the government has held a series of meetings with political parties and social groups to ensure a general consensus on the reforms.
Earlier this month, when an IMF delegation arrived in Cairo to resume talks over the loan, an anonymous official IMF source in Washington confided to an Ahram reporter that the body was still unsatisfied with Egypt’s reform programme and would suggest additional economic reforms.
The IMF team left Cairo on Tuesday without signing the deal, after two weeks of discussions with government officials and representatives of the opposition, such as former Nasserist and former presidential candidate Hamdeen Sabbahi, who is against the loan.
Despite not reaching an agreement, Andreas Bauer, mission chief for Egypt, said that "progress" was achieved "in the discussions with the Egyptian authorities on their economic programme and possible financial support from the IMF,"
Bauer also praised stances taken by Egypt's opposition forces towards the potential loan deal.
“The mission was encouraged by the constructive positions and views expressed by the representatives of political parties on economic reforms and possible IMF support. All sides concurred on the need to protect the vulnerable sectors of society when implementing reform measures," Bauer added.
Lack of transparency, 'harsh' reforms
While the Freedom and Justice Party (FJP) from which President Mohamed Morsi hails fiercely supports the IMF deal without any reservations, five prominent Egyptian parties have unanimously condemned the lack of transparency regarding the preconditions set by the IMF for the loan, and expressed their rejection of any related austerity measures which might harm lower-income sections of society.
But the five political groups are divided regarding their respective stances on the loan.
The Popular Current, Egyptian Social Democratic Party and the Strong Egypt Party have stood against the loan for being conditional upon reforms which they deem too harsh on Egyptians.
“The loan harms the poor segment of Egyptians by eliminating subsidies, raising prices, imposing more taxes and reducing salaries,” Heba Yassin the media spokesperson of the Popular Current told Ahram Online.
On Sunday, Egypt's Shura Council, currently its only legislative body, passed a stamp duty on stock market transactions, amounting to 0.002 percent, and approved increasing taxes on the top income bracket.
Yassin also dismissed government claims that the IMF loan would help restore confidence among foreign investors in Egypt's economy, saying that the economic situation would deteriorate if the government implemented the necessary measures for the loan, especially in light of the ongoing political instability.
For his part, Ahmed Emam, member of the political office of the Strong Egypt party, said that Morsi's government's acceptance of the IMF loan mirrors the economic policies of the former regime, which was dependent on foreign borrowing.
“The IMF is implementing an American agenda which involves interference in Egypt’s internal affairs,” Emam told Ahram Online. “That's why we also want to know what happens behind closed doors between the fund and the Egyptian government.”
The ruling party has refuted this criticism, insisting on the necessity of the loan. "The parties that oppose the loan are taking the stance either because of their ideology or because they are not in a position of responsibility," said Mohamed Gouda, member of the economic committee of the FJP, the political arm of Muslim Brotherhood.
Gouda defended the government's economic programme, denying that it will burden the poor, "contrary to what opposition parties are saying."
"Fact is, we have a funding gap of around $15 billion; and the only available way to cover it is to borrow from abroad," Gouda told Ahram Online.
On Monday the Egyptian Social Democratic Party announced the conditions upon which it would approve Egypt’s agreement with the IMF over the loan. It said that government imposed austerity measures to cut the budget deficit should be matched with a rise in public spending on healthcare, education and sanitation.
The ESDP also demanded the government trim the unemployment rate via creating new job opportunities for the youth.
“Along with the party statement, I think the loan is not compliant with Islamic sharia rules, because the interest on the loan is considered to be riba (usury),” Abdel-Rahman El-Gohary, a member of the Social Democratic Party told Ahram Online.
On the other hand, Egypt’s Constitution Party, which is headed by prominent opposition figure Mohamed ElBaradei, declared its support for the loan in principal, on the grounds that the IMF aid package will represent a vote of confidence in Egypt's economy and attract foreign investment back to the country.
"The government should implement a nationwide development plan once it obtains the loan, rather than only focusing on the budget deficit," Khaled Dawoud, the media spokesperson of the Constitution Party told Ahram Online.
Egypt's budget deficit is expected to reach LE185 billion ($26 billion) in the current fiscal year which ends on 30 June 2013, according to statements made last month by Finance Minister El-Morsi El-Sayed Hegazy.
The Salafists, a dominant Islamic group, are still undecided, as Galal Morra, general secretary of the Nour Party says that the party's members are still debating their stance on the IMF deal.
"Whatever our decision, it will be based on considerations for the public interest, not on the positions of other political factions," Morra told Ahram Online.