Politicizing Egypt’s economic reform

While the gradual meltdown of the Egyptian constitution-drafting process has been at center stage in Cairo over the past few months, the negotiations between the Egyptian government and the International Monetary Fund (IMF) for a $4.8 billion loan have rapidly become central to political conversations in Egypt. Egypt has a checkered past with the IMF. While it views Egypt as a success story for structural adjustment and privatization during the infitah, Anwar Sadat's economic liberalization, and the Hosni Mubarak-era transition away from state ownership, the Egyptian public associates the IMF with the human downside of structural adjustment policies: unemployment, rising prices, and increasing poverty. Even the IMF's own policy papers on Egypt now admit that the "social outcomes were unsatisfactory" during the 1990s and early 2000s.

President Mohamed Morsi's government has a real economic problem: a budget deficit around 11 percent of gross domestic product (GDP), falling tourism revenue, and difficulty encouraging international investment. Bilateral financial support has been forthcoming over the past few months, particularly from the Gulf states, but the IMF loan would be a key international indicator of approval for the regime, and would provide critical support for Egypt's position in the world market. In fact, the loan has been supported by both the Muslim Brotherhood and some Salafi leaders, despite concern among other Islamists that the interest on the loan counts as usury and that the loan has been rendered haram. (The counterargument is that the low interest rate counts as a fee, and that no profit is being made; this is less than convincing to Islamist opponents, but serves as effective ideological cover for the Brotherhood.) The IMF had expressed a willingness to offer a loan package, provided that the Egyptian government drafted an economic plan that met with its approval.

The loan was not only opposed by Salafis. Left-wing political parties, economic and social rights groups, and socialist activist groups stated their objections and led small demonstrations in August when IMF Managing Director Christine LaGarde visited Egypt and preparations for the loan began in earnest. However, the opposition became much more prominent and sustained in November when the IMF's technical team arrived. Opposition was mobilized on three fronts. First, there was a court case brought up by the Egyptian Coalition for Economic and Social Rights to the High Administrative Court demanding that the government reveal all the details of the economic plan. (Although the court postponed a final ruling on the case, it did require that the government release relevant data to the public.) Second, there were a number of public policy papers and statements, including a letter signed by a collection of political parties, civil society organizations, and independent trade unions, the ECESR's position paper on the loan, and a trenchant critique by "Comrades in Cairo." Finally, there were street protests, again organized by left-wing parties, civil society organizations, and activist groups, rejecting the loans.