Rebel Economy spoke to Monica Marks, a Tunisia-based Rhodes Scholar and doctoral candidate at St Antony’s College, Oxford, who debunks the myth that Tunisia was a bastion of liberalism in North Africa. She explains that too many bought into former president Zine El Abidine Ben Ali’s idea of a “Tunisian Miracle”. 

• 1) – Before the country’s revolution, Tunisia was often described as having a large, well-educated middle class and a liberal social system. Will this still be the case under an Islamist-led government?

Two parts of this question are problematic: the supposition that Tunisia had a ‘liberal social system’ before the revolution, and the implication that Ennahda’s Islamism poses the largest threat to Tunisia’s economic future.

Tunisians of all ideological stripes (save for a few Salafis) tend to praise their society for being more tolerant and open than elsewhere in the region, particularly Arab countries to the east such as Egypt and Saudi Arabia. Tunisian society is notably less conservative on a number of fronts—women enjoy more legal protections, public schools are co-ed, alcohol can be procured easily in many parts of the country, and some restaurants stay open during Ramadan.

It is important to note that when observers (particularly foreign observers) characterize pre-revolutionary Tunisia as socially ‘liberal,’ they are often basing this on two simple factors: (1) Tunisia’s post-independence leaders (Bourguiba and Ben Ali) are almost always described as ‘secularists’, and (2) Tunisia’s 1956 Personal Status Code, which is still in effect, granted women more rights than elsewhere in the MENA region and included the Arab world’s only prohibition on polygamy. Taken together, these factors—the secularism of state leaders and women’s advanced legal status—are often enough to prompt commentators to call Tunisia’s society and pre-revolutionary government ‘liberal.

But Tunisian society before the revolution was, in many ways, anything but liberal—at least in terms of its relationship to the state.

Journalists who spoke out against the government would face salary suspension, firings, and harassment at the very least. Critical bloggers were threatened with imprisonment, and some chose to self-deport out of fear of long sentences and/or torture. Real or suspected members of Tunisia’s Islamist movement, Ennahda, faced years of incommunicado detentions, torture, and post-carceral oppression (being blacklisted from employment, being forced to register their names up to five times per day at local police stations, etc.). Leftist activists, though a much smaller group, faced similar brutality. Judges who spoke out against the regime had their salaries suspended without notice, and human rights leaders—such as the prominent lawyer and anti-torture activist Radhia Nasraoui—dealt with near-constant harassment from the regime’s goons in their homes and offices.

Despite Tunisia’s much-vaunted claim to progressivism on the matter of women’s rights, more religiously conservative women, particularly those expected of involvement in Ennahda, underwent myriad forms of abuse, including having their hijabs ripped off by police officers, undergoing long periods of arrest and unofficial detention, and being sexually harassed and abused by security forces. Religious expression was seriously curbed—young men who wore beards were often arrested on suspicion of being Ennahda members, women who worked in state facilities such as schools were generally not allowed to wear the hijab, and police officers were routinely stationed in mosques to monitor Friday sermons.

All of this is to say that we must think critically about this dichotomous picture that is often presented to us in local and international (particularly French and English) media, of Tunisia being a dramatic ‘before and after story’—i.e. a liberal, progressive society before the revolution that has quickly regressed into a sort of Islamist-led backwater.

This is far from the case. What we are seeing after the revolution is a great deal more contestation in the public sphere. Ben Ali held the lid of oppression very tightly. Now the lid has flown off the pot, and long-percolating differences in Tunisian society are finally bubbling to the surface. In some cases, those differences have bubbled over into acts of violence and criminality (such as the June, 2012 protest against the Abdeliyya art exhibit in La Marsa, repeated Salafi attacks on Sufi shrines, etc).

• 2) So Ennahda’s Islamist influence is not the real impediment to the country’s economy?

Islamism is nowhere close to being the chief threat to Tunisia’s economic future.

Rest assured, Tunisia faces major challenges on the economic front: for starters, the public contestation which I mentioned above often manifests itself in the form of strikes and socio-economically motivated protests.

Though major strikes happened under Ben Ali (most notably in Gafsa in 2008), such acts of protest were generally met with swift oppression. The regime used a mixture of police brutality and economic mollification to keep protesters at bay (eg: giving 200 dinars a month to citizens in restive southern areas through bogus public programs—not enough for a decent quality of life, but just enough to keep hungry mouths from protesting in the streets).

After the revolution, a kind of laissez-faire democratic atmosphere started to pervade the country. The state’s monopoly on all forms of authority receded, and people began to express their preferences and grievances about all topics—political, religious, socio-economic, etc.

So strikes have been a major problem for Tunisia’s interim governments, and the transitional government led now by Ennahda. Naturally, foreign direct investors aren’t keen to pour money in a country where strikes are so frequently closing factories. There are other major problems plaguing Tunisia’s economy: poor educational quality, underdevelopment in the interior, the presence of bloated public companies and the huge informal economy.

In my conversations with leading economists speclialising on Tunisia at the World Bank, International Finance Corporation and African Development Bank, I have heard across the board that Ennahda “could not have done much better” on the economy over the past two years, that the challenges are huge and often of a structural nature. So there are a number of major obstacles for Tunisia’s economy here, but Islamism doesn’t seem to be one of them.

• 3) In Egypt youth unemployment stands at 77% and is one of the most pressing problems. How does this compare in Tunisia?

Along with underdevelopment in the interior, youth unemployment is one of the leading economic challenges for Tunisia. These are also important political challenges, since the 2011 revolution – which started with a young vegetable seller’s protest in an impoverished interior town, Sidi Bouzid – which are prompted primarily by socio-economic grievances. The nexus of youth unemployment and regional marginalization in the interior was critical to the revolution, and many ministers and leading economic advisers in Tunisia’s government fear persistent challenges on these fronts might spark a second revolution.

Youth unemployment hovers between 10 and 30%, depending on what region of the country you’re looking at. But current, reliable statistics on things like youth unemployment and literacy rates are difficult to find. That’s because Tunisia’s National Institute for Statistics (INS), along with the leading international development banks here (including the World Bank and the African Development Bank, which is actually headquartered here), have been scrambling to re-diagnose the country’s basic indicators in the wake of the revolution.

Ben Ali very much manipulated the INS, and the international banks will frankly tell you that they bought into Ben Ali’s idea of the “Tunisian miracle” too much—i.e. that they didn’t do enough work to really go beyond the manufactured stats and get a good handle on the socio-economic indicators in the country before the revolution. As this research gets done, it’s becoming clear that literacy rates are lower than previously thought, and that youth unemployment is higher.

What we do know is that the economic situation in Tunisia—despite all its problems—isn’t nearly as dire as the situation in Egypt. While statistics on indicators like literacy may turn out to be about 10 percentage points lower than previously thought (in the low 80s as opposed to the high 90s), this still places Tunisia head and shoulders above Egypt, where literacy rates are around 50 percent. Tunisia desperately needs to reform its educational system to match graduates’ skills with the needs of the market, but there is a good basic educational infrastructure intact here, and the country has immense potential to build. I believe Tunisia could become a real educational hub in the region if the proper reforms and investments are made.

And what are the major factors responsible for youth unemployment in Tunisia?

There are about seven:

(1) the low value-added nature of the economy, which is geared toward benefitting offshore exporters more than developing skills at home;

(2) poor infrastructure in the interior, including roads, water supply, electricity, and internet access;

(3) an outsized informal economy;

(4) a partially closed economic structure benefitting large public companies, such as Tunis Air and Tunisie Telecom;

(5) the relatively low skills of many labourers;

(6) the poor quality of vocational training and the local perception that such training is only for poorly achieving students; and

(7) the significant mismatch between university graduates’ skills and the needs of the job market.

Again, referring back to the last answer, we must try and look at these things in a technical way—not getting too tied up in the secular vs. Islamist debates, which are so frequently dominating local and international headlines.

• 4) How is Tunisia relying on international donors and assistance?

This is a critical question, and it’s one that’s not getting enough attention in my opinion.

From my work with the Institute for Integrated Transitions (IFIT), a newly founded Barcelona-based non-governmental organisation (my report, called “Inside the Transition Bubble: International Expert Assistance in Tunisia”, can be accessed in English or Arabic here) we looked at international expert assistance in four key areas of Tunisia’s transition: media, judicial, and security reform and youth employment.

In the youth employment sector, one of the most intriguing things to come out the research was that key policy makers in the troika coalition (most often from Ennahda and the secular CPR party) often feel deeply confused by and frustrated with the international advice they are receiving.

Many lamented Tunisia’s lack of in-house ability to diagnose domestic economic problems.

“We are forced to rely on internationals who take our data, then go and formulate plans and projects for us without ever explaining how they got from the data to the plans and projects,” one ministerial adviser who asked not to be named said.

One quote that I cited in the IFIT report was from Jameleddine Gharbi, Minister of Regional Development and Planning. “They come with an already determined vision and only want to focus on a specific subject,” he said, referring to international experts. And:

“The needs in the interior are critical, but they don’t look there… We point, we say ‘Look—this is our problem.’ But then they point and say ‘no—your problem it is here.’ It’s as if I have a red folder and they try to convince you that no, it’s blue.”

The most disturbing quote I heard on this theme during the course of interviews was that certain international advisors, whom my interlocutor wouldn’t name, advised the government to [completely] cancel [rather than reform] key subsidies on basic goods like cooking oil and bread. I have not verified this information, but fortunately the subsidies—which are absolutely critical for Tunisia’s poorest citizens—are still in place.

Egypt’s deputy finance minister, Hany Kadry Dimian, has left his post after six years in the ministry, a source at the finance ministry told Rebel Economy, delivering a blow to the country’s chances of concluding a loan agreement with the International Monetary Fund. 

Mr Dimian, who has served as the deputy since 2007 and survived all of Egypt’s five finance ministers in the two years since the revolution, will leave “at the end of this week”, according to the source who did not name his successor.  

While the nature of Mr Dimian’s departure is unclear, the timing sends a bad signal to international policy makers and Egyptian officials who say they are on the cusp of signing an IMF loan worth $4.8 billion. 

Mr Dimian has proved to be an important component of Egypt’s finance ministry, surviving all five finance ministers since the beginning of the revolution in 2011.

As well as creating a Macro-Fiscal policy unit at the ministry of finance in 2005 (which has been a leading the writing of Egypt’s economic plan), Mr Dimian also represents the Egyptian side for the Egypt-EU economic dialogues and is coordinator for the EU-Egypt Neighborhood Policy Action.  

He also serves as a board member of the Egyptian Competition Authority and the country’s National Telecommunication Regulatory Authority. 

A second source, who was aware of the deputy minister’s departure, said a number of people have been nominated for the position including Maged Shawky, former head of the Cairo and Alexandria Stock Exchange,  Amr El Kadi, head of risk management at private equity firm Citadel Capital, and Nidal Asr, assistant Sub-Governer at Egypt’s Central Bank.

In a new policy paper for the European Council on Foreign Relations – “Egypt, the IMF, and European Economic Assistance” – I  argue that while structural reform is important to deal with Egypt’s deep rooted economic problems, it would be short sighted for the EU and key member states not to act now.  Here’s a blog post on the paper too.

Part of the inspiration for this paper came from numerous meetings with EU diplomats who have, up till now, held back most of loans and grants to Egypt because of a lack of political stability and consensus.

However, the more I spoke to Egyptian players, the more I saw this as a Catch 22 situation. 

Egypt needs cash to prevent instability in the face of unemployment and economic collapse, but it can’t get the cash without signing up to reforms that would themselves cause more short term instability.

Europe must commit some money to grassroots training now to avoid this Catch 22 destroying the consolidation of democracy in Egypt.

My key arguments are as follows:

• The EU should invest in young people, with the Egyptian private sector still struggling to find qualified employees despite high unemployment levels. Donors should target vocational training programmes for young Egyptians.

• The EU is already due to sign two programmes that put millions of dollars into infrastructure projects and technical skills training. These, plus World Bank funding for small and medium enterprises, should serve as a model for smaller, targeted aid programmes.

• Europe should still stand by the IMF’s comprehensive reform programme, aimed at fixing long-term structural problems in Egypt’s economy.

Egypt Economy Near Collapse.

Egypt on the Brink.

Egypt Going to the Dogs.

Egypt’s Financial Armageddon.

Those are just a small selection of headlines used in the past few months.

Egypt’s economy, it’s fair to say, is close to financial ruin.  The government’s reluctance to change its spending habits, or raise money (by raising taxes even just marginally for the middle and upper class), has left the country in economic paralysis.

The lack of a decent economic reform plan has stalled negotiations with the IMF for a $4.8 billion loan, undermining the credibility of the Morsi administration, and prompted investors to stay away.

But what is worse is that all the government’s mistakes have been so high-profile, and embarrassing, for Egypt.

Even behind closed doors within government, officials have begun blaming each other of complacency.

Now, the key question is how long can Egypt hold on and at what point could the economy collapse? 

What are the disasters in the making that are hastening the speed of an economic fallout?

1) FOREIGN CURRENCY RESERVES

This number has become ubiquitous with the fast decline of Egypt’s economy. International reserves have dropped more than 60% since the beginning of the revolution, falling from $36 billion at the end of 2010 to $13.4 billion in March.

The Central Bank used billions of dollars to prop up the value of the Egyptian pound (even though many investors saw it as overvalued and still do – hence the black market).

Here’s the problems:

1) Cash injections have come in from Qatar, Turkey and to a lesser extent Saudi Arabia, helping Egypt keep its coffers fairly full. But this is not sustainable.

The “Gulf tap” is not infinite and could be turned off at any point.

Plus, money from the Gulf to keep plugging reserves, that in turn helps to pay off debts that keep rising, is just like burning money.  What’s the point of investing in a country that uses money to pay off a cycle of debts rather than for investing in restructuring and reforms?

2) The other problem with the dangerously low level of reserves, is that it leaves Egypt highly vulnerable to any currency/commodity price crash.

Exhibit A: Last week the price of gold crashed, falling from a high of $1,900 an ounce at one point to less than $1,400 an ounce.

Egypt, which before the revolution, would not have been phased by this drop, this time felt the impact.

The country lost $500 million worth of currency reserves from the gold rout, Pharos Holding, Cairo-based brokerage firm said a few days ago. That’s because Egypt has around 75 tonnes of gold, so if the commodity crashes, so does its value for the Central Bank.

3) The less hard currency Egypt has, the less money it has to fund fuel and wheat imports, the more shortages and blackouts, and the higher the risk of social unrest (more here on the energy crisis and related debt problems). As just one indicator, the US has warned Egypt that it is overestimating the size of its upcoming domestic wheat crop in a sign that pressures are mounting on the country’s depleted foreign currency reserves.

While reserves have lingered at around $13 billion to $15 billion in the last six months, this is not a situation Egypt wants to be in. If reserves drop further, it could find itself struggling to control a parallel black market where the pound is trading at 8 or 9 pounds to the dollar.

2) UNEMPLOYMENT

The statistics say it all, and even those numbers don’t depict the true state of unemployment in Egypt (because they ignore the huge informal market that churns along quietly alongside legal business).

Egypt’s jobless rate stood at 12.7% in 2012, up from 12% in 2011 and 9% in 2010, according to figures from the country’s statistics agency. Even that annual figure is tame in comparison to the latest quarterly figure that showed the unemployment rate was 13%  in the latest quarter of 2012.

The startling figure, however, is that of the total unemployed, almost 77% (up from 74% just a few months ago) are between the ages of 15 and 29.

The fact that most Egyptians who are unemployed are in this age bracket is extremely dangerous for the Morsi administration, which has consistently failed to get critics and the opposition on side.

Some international lenders are making small moves to help with funding small businesses and offering advice to burgeoning entrepreneurs. But more work needs to be done. The president and the government need to convince international players that they are working for the good of Egypt, not for their own political wins.

Without a doubt, as the number of people out of work ticks higher, so will resentment and anger and that can only mean a repeat of January 25, 2011.

3) DEFICIT

Unsurprisingly, Egypt announced today it will exceed its budget deficit target this year because frankly all the delays in enacting spending cuts have all but evaporated.

The deficit may reach 11.5% to 11.7% of economic output in the year that ends in June compared with 10.4% targeted earlier, Egypt’s finance minister El-Morsi Hegazi said.

The government wants to reduce the gap in the 2013 to 2014 fiscal year to 9.6 percent of gross domestic product, according to a draft budget he presented.

In the meantime, Egypt’s credit rating has been lowered to junk or near-junk status by the three largest ratings agencies: Moody’s, Standard & Poor’s and Fitch. Major economists and lenders are also cutting their growth forecast for Egypt (the IMF cut its 2013 growth forecast for the Egyptian economy to 2%, down from the 3 percent initially predicted last October).

As mentioned above in previous blog posts, the Morsi administration has repeatedly made ad hoc decisions, which seemingly disconnect from one another and stray far from a long-term economic plan.  That has meant a delay in major spending cuts, and revenue-generating initiatives.

In fact, if anything, Egypt has increased spending where it least needs it.  It spends an extra $1.6 billion every three months on inefficient energy subsidies (on top of what is already budgeted), and has hiked the bill for public salaries by 80% to $25 billion as the Islamist-led government appears to try to appease the public with more money ahead of parliamentary elections in October.

What’s more, revenue generation is weak. Falling short of making any dramatic tax increases, Egypt regularly misses tax collection targets, losing out on billions of Egyptian pounds every fiscal year.

WHAT HAPPENS NOW

All of the above really points to one conclusion: the President and his band of loyal Brothers have failed, after nine months in power, to improve the lives of Egyptians.

Yes, considering the scale of the political transition, change was never going to be easy, but the government’s repeated blunders have undermined confidence in Egypt and overseas, and left them with an even more difficult job.

But Morsi must act now, reach to the other side for consensus, and convince Egyptians and international lenders he is not a fraud grappling for power, or prepare to be held accountable by the people.

This is PART 1 of a two-part series by Isabel Esterman on government securities: treasury bonds and bills, and other debt instruments sold by a government (including Egypt) to finance its borrowings. 

In the last two years the Egyptian government has been leaning more heavily on domestic banks in an attempt to narrow its deficit and fund its borrowing needs.

Borrowing money from lenders is pretty much like an individual borrowing money from a bank: the bank evaluates your credit history, you borrow X dollars and pay Y% interest. This makes it relatively easy to have critically important public conversations about whether taking on a loan is a good idea.

Bond issuances aren’t actually that much more complicated, but the process is usually obscured by specialised jargon — YTM, coupons, issuances, securities, t-bills. People’s eyes glaze over, and transactions involving billions of dollars of public funds get shunted off to the financial pages.

Instead of headlines like “Government borrows LE6 billion at 14.77%” we see “CBE offers 6 billion in t-bills; average yield climbs to 14.77%”.

What is more, we often conflate government borrowing via treasury bond and bills (a key element of fiscal policy) with the secondary market for bonds (buying and selling government debt), which is a specialized, complicated financial tool where bonds are traded between investors.

Confusing the two is a problem because it means that people who aren’t bond traders (most of us) also aren’t kept well informed about how much money the government is borrowing.

The below is an introduction to government bonds and their purpose. We will explain more about what this means for Egypt in Part 2, coming tomorrow. 

“Boom times have arrived in Libya,” declares this analysis of the country’s economy in Revenue Watch.

The tangible and intangible proof is there. Cafes and restaurants are heaving and US franchises are choosing to open along Tripoli’s beautifully historic, and untouched streets.

There are high hopes for the future, Revenue Watch says:

In 2012, Libya’s economy grew by 122 percent, by far the fastest growth rate in the world. One reason for such high growth is the economy’s collapse during the revolution; however, GDP is expected to grow another 17 percent this year, faster than all but a handful of countries.

But much more needs to be done, say economists and bankers on the ground.

Rebel Economy spoke to Alaa El Huni, a Libyan investment banker who was part of the opposition’s economic team during the revolution. Their work was often described as constituting the “Rebel Economy”.  He explains that Libya has a long way to go before boom times. 

AH: I think the issue of government spending is better defined as the governments ability to spend.

AH: There was a clear public backlash, but I truly believe the real mistake was the PR and Communication initiative behind this decision. There was no clear message sent to the Libyan or Egyptian people regarding this matter.

Much of the Libyan public sentiment was that a deal was brokered between the Libyan and Egyptian governments. They believe that there is a direct correlation between the extradition of key members of the old Gaddafi regime that are residing in Egypt and the financial pledge from Libya to Egypt. In essence, it is like Egypt sold these people back to Libya. The key individual that Egypt was meant to hand over was Ahmed Qadhaf Al Dam. This belief is similar to the one voiced by the Libyan public over the hand over of Baghdadi (Tunisia) and Abdullah El Senussi (Mauritania).

With the rise of political Islam across North Africa in the wake of the Arab Spring uprisings of 2011, Islamic finance is being touted as the solution to decades of unemployment and economic inequality.

“We’ve tried socialism, we’ve tried capitalism, now we’re trying Islam,” cried supporters of Mohammed Morsi, when he was elected as Egypt’s first Islamist president last June. In Libya and Tunisia, new political movements have pledged to use Islamic principles to right their wayward economies.

But some critics – including advocates for the greater use of Islamic finance – believe that a sudden and rigid adherence to Islamic law, known as Sharia, could dramatically slow down economic recoveries across the region at a time when governments are already struggling to establish stability.

With rising unemployment, growing deficits and continued protests, anything less than a quick-turnaround for post-Arab Spring economies could be disastrous, economists warn.

“Governments have to prioritise getting economies back in shape before introducing Islamic finance,” said Douglas Johnson, chief executive of Codexa, a New York-based investment bank that creates Sharia-compliant financial products.

Egypt, where the Muslim Brotherhood is positioning itself as the most powerful political group in the post-Mubarak era, has become an important test for whether the marriage of Sharia with a 21st-century country can ameliorate financial and social hardship.

The Islamist government has focused on passing new laws to allow the issuance of sukuk, or Islamic bonds, and pledged to centralise zakat, a mandatory charitable giving from Muslims, to better target poverty.

While a shift to Islamic finance could bring an economic boost by giving countries access to a huge pool of Islamic investment funds from the oil-producing countries of the Persian Gulf, such as Saudi Arabia, Qatar and the United Arab Emirates, some say Sharia is out of sync with modern economics and cannot work in today’s world without extensive updating.

“What passes as Islamic finance is anything but interest-free,” said Timur Kuran, a professor of economics and political science at Duke University. Mr Kuran is the author of “The Long Divergence,” a book that argues that Arab countries have failed to keep up with the economies of the West because of the rigidity of Islamic law around business and finance.

Sharia, which is “out of date” and has not played an important role for almost two centuries, only serves to add an “Islamic veneer [which] will not improve an economy in any measurable way,” Mr Kuran said.

Egypt’s long-winded negotiations with the International Monetary Fund for a $4.8 billion loan have shown how an uncompromising adherence to Sharia can slow down much-needed injections of funds. Clerics and Islamists have dithered over the loan, in part, because the loan comes with a 1.1 per cent interest rate. Sharia prohibits usury.

After an initial reluctance, the Muslim Brotherhood’s Freedom and Justice Party recently endorsed the IMF loan and called it Sharia-friendly. They describe the interest rate as “an administrative fee”.  But the IMF has distanced itself from any claim that the loan is Sharia-compliant, saying instead that the terms of the loan are “favourable”.

Without the funds, Egypt has had to allow the currency to gradually devalue and risk higher inflation, especially for food, provoking a backlash from protesters who believe the government has relegated demands for social justice.

The careful deliberations of the Brotherhood and its political arm reflect the group’s more pragmatic views of religious doctrine, but also what they see as a tremendous opportunity.  About 65 per cent of Egypt’s mostly Muslim population do not have bank accounts. By increasing access to Islamic finance, they believe Egypt could gain billions of dollars in new deposits.

“Islamic Finance is a realistic option especially with demand coming from those who by nature prefer ‘Islamic’ solutions regardless of the sector and domain,” said Ashraf Serry, one of the Muslim Brotherhood’s top economists.

North Africa 

Governments across North Africa are also shifting to Islamic finance as a way of reducing deficits.

The Tunisian government is trying to diversify and increase its sources of revenues by tapping into Islamic finance and issuing sukuk.

Tunisia’s newly elected Islamist movement Ennahda, which has led the government after the overthrow of president Zine al-Abidine Ben Ali last year, said the government would ensure that Islamic banks were able to compete on a level playing field with conventional banks and wants Tunisia to become a regional center for Islamic finance.

Critics in Tunisia believe the strategy is more about playing to Ennahda’s fervent constituency than wise economic policy. Tunisia’s economy has long been a hotspot for foreign investors, especially from Europe, because of its Western-influenced political, economic and legal system.

Since protests broke out in 2011, Tunisia’s unemployment rate has risen to 18 per cent from 13 percent, with about 750,000 people out of work. The worsening situation has fuelled arguments that what the country needs is stability, not Sharia-compliant financial products.

For many Arabs living in the Middle East, however, Islamic finance is a welcome relief.

“Libya is 100% Muslim so there is a willingness to adopt islamic banking solutions and this will definitely have a significant impact on retail and personal banking in Libya,” said Alaa El Huni, an investment banker based in Tripoli, Libya.

Libya’s government has indicated it will further enshrine Sharia in laws and approved an Islamic banking law in May to stimulate its private sector following a civil war that ousted Muammar Gaddafi.

Here, in a country devastated by lengthy battles between rebels and Gaddafi’s supporters, the opportunity for restructuring the Libyan economy is larger.

But Mr El Huni’s warned that moving from one extreme to another will negate any efforts.

“A country run wholly on islamic finance would to some extent alienate itself or at least create barriers to an effective relationship with the rest of the world.”

Yesterday I had the pleasure of speaking to Robert Siegel, host of NPR’s daily show, All Things Considered about the state of Egypt’s economy. 

The hot topic at the moment, of course, is how and when Egyptian officials will secure a $4.8 billion loan from the International Monetary Fund. What began as a smaller cash injection of $3.2 billion in May 2011 to buffer the economy has turned into a lifeline for the nation and one that will unlock an additional $12 billion in financial support.

I spoke about the significance of the IMF loan, it’s history with Egypt and where the government is going wrong.

Click here to listen and for a full transcript.