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Egypt and the IMF

Topple Their Debts

By ERIC WALBERG | CounterPunch | November 4, 2011

The Popular Campaign to Drop Egypt’s Debts was launched at the Journalists’ Union 31 October, with a colourful panel of speakers, including Al-Ahram Centre for Political & Strategic Studies Editor-in-Chief Ahmed Al-Naggar, Independent Trade Union head Kamal Abbas, legendary anti-corruption crusader Khaled Ali, and the head of the Tunisia twin campaign Dr Fathi Chamkhi.

Moderator Wael Gamal, a financial journalist, described how he and a core of revolutionaries after 25 January started the campaign with a facebook page DropEgyptsDebt. The IMF offer of a multi-billion dollar loan in June was like a red flag in front of a bull for Gamal, and their campaign really got underway after that, culminating in the formal launch this week, just as election fever is rising.

“Just servicing Egypt’s debt costs close to $3 billion a year, more than all the food subsidies that the IMF harps about, more than our health expenditures,” Gamal said angrily. “We are burdened with a $35 billion debt to foreign banks, mostly borrowed under the Hosni Mubarak regime, none of it to help the people.”

Ali explained the basis of the campaign, which does not call for wholesale cancellation of the debt, but for a line-by-line review of the loan terms and useage to determine: whether the loan was made with the consent of the people of Egypt, whether it serves the interests of the people, and to what extent it was wasted through corruption. He explained that the foreign lending institutions knew full well that Mubarak was a dictator conducting phoney elections and thus not reflecting the will of the people when they showered him with money, and they should face the consequences — not the Egyptian people.

These are the internationally accepted conditions behind the legitimate practice of repudiating “odious debt”, which were used by the US (though mutedly) in 2003 to tear up Iraq’s debt, and by Ecuador in 2009. “Ecuador had an uprising much like our revolution and after the next election the president formed an audit committee and managed to cancel two-thirds of the $13 billion debt,” noted Gamal, leaving the conferencees to ponder what a truly revolutionary government in Egypt could do for the health sector and for employment.

Al-Naggar told how the loans propped up the economy as it was being gutted under an IMF-supervised privatisation programme from 1990 on, allowing foreign companies and Mubarak cronies to pocket hundreds of millions of dollars and spirit them abroad. Meanwhile, what investment that trickled down from the loans went to financing prestige infrastructure projects like the Cairo airport expansion, which was riddled with corruption and serves only the Egyptian elite. Virtually all the loans from this period should be considered liable for writing off.

No government officials deigned — or dared — to come to the conference. On the contrary, Egypt’s Finance Minister Hazem Al-Biblawi told Al-Sharouk that it defames Egypt in the world’s eyes, saying, “like the proverb ‘It looks like a blessing on the outside, but is hell on the inside’.”

Both Gamal and Al-Naggar criticised Biblawi for distorting their intent, which is not to portray Egypt as bankrupt, like Greece, but to shift the burden of the bad loans to the guilty parties — the lenders, and thereby to help the revolution. “It is the counter-revolution that is discrediting Egypt. And they are the old regime that got the loans and misused them, and are now trying to discredit the revolution. The international community should willingly write off the odious loans if it wants the revolution to succeed,” exhorted Al-Naggar.

The enthusiasm and sense of purpose at the conference was infectious. Indeed, this campaign is arguably the key to whether or not the revolution succeeds. But it requires a political backbone that only an elected government can hope to muster. The fawning of Al-Bablawi — this week he hosted another IMF mission — looks like the performance of someone from the Mubarak era, not someone delegated to protect the revolution. He welcomed the delegation and “the possibility of their offering aid to Egypt”.

Al-Naggar pointed out that the purpose of the IMF is not to aid the Egyptian people, but to tie the government to international dictate. Rating agencies are part of this, downgrading Egypt’s credit rating after the revolution. Why? Because Egypt is less democratic? Or because it will be harder to ply Egypt with more loans to benefit Western corporations, and to keep the Egyptian government in line with the Western political agenda. “Silence is golden,” Al-Naggar advised Biblawi, meaning, “If you don’t have something good to say, don’t say anything.”

Chamkhi brought Tunisian warmth to the meeting, though he further incensed listeners as he explained how the Western debt scheming is directly the result of 19th century colonialism. He told how France colonised Tunisia, stole the best agricultural land, and then how the quasi-independent government in 1956 had to take out French loans to buy back the land that the French had stolen, thereby indenturing Tunisia yet again, in a new neocolonial guise. The foreign debt really exploded with Zine Al-Abidine Ben Ali’s kleptocracy, just as did Egypt’s under Mubarak. Shamati eloquently expressed how “debts are not for our development, but to make us poor. To create a dictatorship of debts.”

Tunisia’s first democratic elections brought the Congress for the Republic, which supports the debt revision campaign, 30 seats. So far in Egypt, according to organiser Salmaa Hussein, Tagammu, the Nasserists and Karama support their efforts, along with presidential hopefuls Hamdeen Sabhi and Abdul Monem Abul Fotouh.

There is an international campaign dating from the 1990s, the 2000 Jubilee debt relief movement, and the Cairo conference heard a report from London about efforts on behalf of many third world countries — now including Egypt and Tunisia — by public-spirited Brits. The Arab Spring success stories now have a determined and politically savvy core of activists who know what the score is and will be pushing their respectively revolutionary governments to repudiate the debts from the corrupt regimes they overthrew at the cost of hundreds of lives. As the fiery Independent Trade Union head Abbas cried, adding an apt phrase to Egypt’s revolutionary slogan: “Topple the regime, topple their debts!”

Eric Walberg writes for Al-Ahram Weekly. You can reach him at http://ericwalberg.com/

November 6, 2011 Posted by aletho | Corruption, Economics | Leave a comment

Drop ‘dictator debt,’ activists and economists say

By Max Strasser – Al-Masry Al-Youm – 28/10/2011

Egypt has a budget deficit of nearly 10 percent of GDP and the finance minister recently said that the country is on the brink of a liquidity crisis. Meanwhile, economic growth has slowed since the uprising, decreasing government revenues, while public sector workers around the country are striking to raise wages that have been stagnant for decades. Egypt is in a tight fiscal spot.

But a group of Egyptian and international activists have a solution that would take pressure off the budget and at the same time undo the economic legacy of Hosni Mubarak’s corrupt regime. The Popular Campaign to Drop Egypt’s Debt, a coalition of civil society groups and concerned individuals, are calling for a comprehensive public debt audit with the eventual aim of debt forgiveness from foreign lenders.

“This is a popular movement that aims to facilitate Egypt’s economic independence from the many forms of exploitation, subordination and resource misappropriation that were imposed upon the people of Egypt during the past decades by the regime of the ousted dictator Hosni Mubarak and his collaborators abroad,” the campaign wrote in its founding statement.

The campaign, which has been growing since it began on Facebook in March, will kick off publicly with a “Global Day for Egyptian Debt Audit/Cancellation” on 31 October, marked by events in Cairo, as well as Paris, Berlin and London – the capitals of some of Egypt’s biggest creditors. The campaign here has earned the support of some prominent civil society organizations in addition to individual activists, economists and economics journalists.

Organizers hope that this will help push the issue of debt forgiveness into the public conversation in Egypt and among governments that hold Egyptian debt.

“What we’re trying to do is draw public attention, because no one is talking about it,” says Noha al-Shoky, one of the founders of the campaign. “The masses don’t understand that we have a situation at hand here.”

The conference in Cairo will also feature Fathi Chamkhi, a Tunisian university professor who is also leading a similar campaign at home. Those involved in the campaign are hoping that in the wake of the uprisings in the North African countries there is a chance for a clean break with the economic legacies of the fallen regimes.

Budget problems, debt solutions?

International credit rating agencies downgraded Egypt’s sovereign debt rating earlier this month due in part to fears about the high budget deficit.

By the end of the fourth fiscal quarter of the 2010/11 fiscal year, Egypt will hold almost US$35 million in external debt, most of it medium- or long-term, according to the Central Bank of Egypt, which also states that the government pays US$3.4 billion in interest on foreign debt. In addition to this, Egypt has about four times as much debt held by local banks.

Economists and analysts point to a number of other problems that contribute to the high budget deficit, such as massive spending on untargeted subsidies. But debt relief could be a major step toward solving the problem.

At the same time, though, the military-backed interim government is looking elsewhere for budget support.

Planning and International Cooperation Minister Fayza Abouelnaga, who is responsible for international agreements, is currently negotiating with the G8 industrialized states, Gulf countries and International Monetary Fund (IMF) and World Bank in an attempt to secure US$35 billion in loans and economic assistance, according to a government statement earlier this week.

Abouelnaga also announced on Tuesday that she would begin negotiations with the IMF for a US$3 billion loan, the same amount that the cabinet rejected from the IMF in June.

“Given the status of the huge budget deficit and borrowing from abroad, then definitely we need some kind of relief from the debt we have from the past, which is actually more than a third of the budget,” says Ahmed Ghoneim, a professor of economics at Cairo University who is not affiliated with the campaign in any way. “Any kind of initiative [for debt forgiveness] could help the economy.”

Also, some activists hope, wiping some US$30 billion from the ledger book could free up more funds for the social justice spending that many demand, from doctors who are asking for more money for public health to public sector workers demanding better wages.

Moreover, an infusion of foreign capital in the form of debt relief could help spur Egypt’s economic recovery, says Amr Adly, an economist with the NGO Egyptian Initiative for Personal Rights, which has backed the campaign. Improved economic conditions will help produce political stability in the long-term, Adly says.

A time for transparency

Before debt is forgiven, the organizers of the campaign plan to hold a public debt audit, in which Egyptians fully examine the money owed in their names.

A debt audit is a comprehensive examination of what debts are owed to whom and how money has been used. Some of this information is publicly available, but is rarely looked at by people outside the economic elite responsible for making decisions.

The campaigners hope to involve as many people in the debt audit as possible, from students to civil society members to representatives from the popular committees. Some people have already begun working on this, Shoky says, including economics students who are combing through many CDs of data.

The audit will help introduce a level of transparency that never existed under the Mubarak regime.

“I am not a specialist in economics, but I believe that individuals should be involved in how the country is run,” Wael Khalil, an activist and blogger and member of the campaign said in a statement. “Part of this involvement is through knowledge sharing. The priority is to access information, to access the details and to be able to publish it.”

Public involvement in the debt audit will push for transparency and accountability, Adly says, forcing lenders to take into consideration the legitimacy of the governments that they are lending to.

Mubarak’s odious legacy

Debt cancellation campaigners believe that they can make a strong case for the cancellation of Egypt’s debts based on the principle of “odious debt,” a legal theory that holds that debts made by a government that are not in the people’s national interests are illegitimate and should be forgiven once the autocratic regime is removed from power.

Precedents for this date back to the 19th century.

Recently, after the United States invaded Iraq and deposed Saddam Hussein, Washington succeeded in convincing many Western lenders to forgive Iraq’s foreign debts incurred under the former leader’s regime. Post-Mubarak Egypt should fall under the same logic, the debt cancellation campaigners believe.

“The whole idea of odious debt challenges the conclusion of the debt in the first place, saying that the government that signed the debt was not legitimate and borrowers didn’t keep up safeguards of having parliamentary supervision, monitoring,” says Adly.

“There’s been a lot of talk by Western governments about supporting people instead of dictators, so we’re challenging them to put their money where their mouths are,” says Philip Rizk, a co-founder of the campaign.

October 30, 2011 Posted by aletho | Corruption, Economics | Leave a comment