Egypt and the IMF: A fraught relationship

Egypt's $4.8 billion International Monetary Fund (IMF) loan deal looks set to be completed by the end of the year. At the moment (November 2012), an IMF technical team is in Cairo hammering out the final details in a negotiating process described as “extremely positive”. Egypt's relationship with the IMF, however, is nothing new. It's a fractious relationship going back decades, to the Hosni Mubarak era.

Mubarak, a former air chief marshal in the Egyptian air force, entered politics and was appointed vice-president of the country in 1975.

He became Egypt's fourth president in 1981 following the assassination of President Anwar El Sadat. Within four years of coming to power, dire warnings were issued by the IMF over Egypt's faltering economy and the country's difficulty in servicing foreign debts totaling $31 billion.

Talks began late in 1986 between Egypt and the IMF over a $327 million loan deal. Months of delay followed because of disagreements but a deal was eventually struck in May 1987. More than a year later, Egypt was knocking at the IMF door again looking for further money. In 1991, the IMF approved a $372 million standby loan in return for structural reform of the economy. Over the next few years, and under pressure from the IMF, the country followed through with a privatization plan which raised $1.25 billion. Then in 1998, Egypt announced it no longer needed IMF help.

Fast-forward to January 2011 and Egypt's uprising which resulted in the overthrow of the Mubarak government. Some three months later, talks began with the IMF over a $3-4 billion loan. But they came to nothing when Egypt pulled out partly due to public criticism.