Egypt’s economy and the contentious International Monetary Fund loan were debated over the weekend in two pieces published in the The Guardian and Egypt Independent. Both are worth reading and suggest that the IMF loan is not the most obvious solution to the nation’s economic woes.
There are alternatives on the table, both pieces argue.
In The Guardian, author Nick Dearden, who is director of the Jubilee Debt Campaign (the UK equivalent of lobbying group “Drop Egypt’s Debt”) concludes his blog piece by saying:
In Egypt, the path to genuine development is open – in many ways, it will never offer better or clearer alternatives. But all of this will be impossible if the IMF gets its way.
Dearden says the political mayhem from embassy protests in the last fortnight have caused a distraction from what the authorities are really up to: signing a $4.8 billion with the IMF.
The alternatives are plentiful, writes Maggie Hyde, the business reporter at Egypt Independent and include raising taxes on the rich and cancelling debt.
Now writing off masses of debt may be convenient and better than repaying them with interest, but this isn’t as alternative from the IMF as critics believe.
In fact, as part of an IMF package in the 1990s, the same framework also provided for cancelling 50% of Egypt’s official debt from countries that were members of the Paris Club.
Critics of the IMF loan must look carefully at the complex web of “aid” and support often given in tandem. It is also among Rebel Economy’s main arguments that most financial solutions won’t work if implemented in isolation.
A currency devaluation would never work if it wasn’t administered at the same time or just after an IMF loan was secured.
CBE Governor to Retire, Finally
The governor of Egypt’s Central Bank has confirmed his retirement by the end of the year, after nearly a decade in the post, Bloomberg has reported, according to my friend on the inside Nadine Marroushi, who is a reporter at BBG.
Farouk El Okdah was made head of the CBE in 2003 and was previously chairman and CEO of Egypt’s state-owned National Bank of Egypt.
Okdah, who has kept a low profile over the years, oversaw the flotation of the pound and the development of an interbank foreign exchange market, helping eliminate the black currency market. Foreign reserves jumped to $35 billion from $14 billion during his time as CBE head (though obviously reserves are back down to where they started – probably a depressing feeling for Okdah).
Oil Troubles Simmer
Egypt’s Minister of Petroleum Osama Kamal arrived in Qatar on Friday to negotiate a gas-importing contract, the state-run Al-Ahram newspaper reported Saturday.
The Egyptian government is negotiating importing 400-500 million cubic feet on a daily basis from the world’s biggest supplier of liquified natural gas, the report said.
It is yet more evidence of Egypt’s attempts to plug its all important gas shortage which provides power for electricity generation and meets other domestic needs.
A small story in Al Ahram this morning quoting the head of the Egypt state oil company EGPC, Hani Dahi, suggested Egypt paid foreign oil partners $9 billion in the last fiscal year of 2012/2011 – that is the biggest amount quoted yet. Other estimates have put debt to foreign partners at $6 billion at the most.
This is the amount Egypt had owed to oil companies for oil and gas exploration. Debts accrued since then, however, are unclear.
Another bad break-up?
Saudi Arabian construction company Mohammed al-Mojil Group on Saturday called for an emergency general meeting in November to discuss breaking up, saying its losses now exceeded three-quarters of its capital, Reuters reported.
External auditors called in by the company also found its liabilities exceeded its assets, leaving shareholders with a deficit of 279.8 million rials or $74.6 million.