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Ahram Online: IMF should cease all loan negotiations with Egypt: Campaign group

The Popular Campaign to Drop Egypt's Debt demands that all conditionality clauses relating to the proposed IMF loan to Egypt be revealed.
22.04.12 | Interesting article at Ahram Online

The Popular Campaign to Drop Egypt's Debt (PCDED) has issued an open letter to the International Monetary Fund (IMF) demanding it terminate all negotiations related to the proposed $3.2 billion loan to Egypt, which PCDED labeled "odious."
PCDED, which has been campaigning hard against IMF borrowing on the basis of a lack of transparency on the economic reform programme conditional to the loan, urged the international body to "disclose the details of the economic reform programme and the details of previous drafts of the programme so that the IMF is not complicit in sidelining the Egyptian people."

The reform programme proposes a shake-up of Egypt's sales tax, including unifying rates, simplifying rules and rationalising exemptions.

The eight-page programme document has not been officially published by the Ministry of Finance; information available on it is sourced from a leaked draft. PCDED criticised the lack of publicly available information on the reform programme and its probable effects on the population.

"The economic reform programme was never discussed in any public sessions in parliament to this day," the PCDED letter reads. It adds that the programme was only discussed behind closed doors, among members of parliament’s Planning and Budget Committee, and representatives of the government and the IMF.

Key to the proposal is the goal of cutting public debt to some 60-65 per cent of Gross Domestic Product (GDP) by 2016/17, mainly through raising tax revenues and a one-off sales tax. Total domestic debt was 72.2 per cent of GDP in December 2011.

Analysts and observers deem the $3.2 billion loan essential for dodging a looming devaluation for the Egyptian pound by keeping the balance of payment deficit at manageable levels.

Egypt's net foreign reserves were rapidly depleted since early 2011, falling to $15.119 billion at the end of March 2012 as the Central Bank used the reserves to support the local currency. The current level barely covers three months of imports.

On 11 April, the IMF urged the Egyptian government to "mobilise required political support" for reforms and for the 2012-2013 budget. Members of the parliamentary Budget Committee have slammed the proposed programme on several occasions, illustrating a growing political rift between Egypt’s government and the People's Assembly.

The loan deal is due to be concluded soon. Nonetheless, Egypt attended the spring IMF and World Bank meetings minus its key planning minister. Momtaz El-Saeed, minister of finance, also did not attend due to health reasons, sources inside the ministry told Ahram Online. Minister of Communications and Information Technology Mohamed Salem headed the delegation.

While PCDED is working actively towards blocking the loan, the campaign has not provided any alternative bailout strategies for the economy should the facility be cancelled.