FacebookTwitterRedditEmail

Egypt vs. the IMF

It is no secret that Egypt has put all its faith in the US and Western international institutions since the days of Egyptian president Anwar Sadat, contracting a huge foreign debt, a process that was increasingly corrupt, despite being careful watched over by those very agencies. This debt is financed by foreign banks, and must be repaid in dollars — with interest. If much of the money they create and then “lend” is siphoned off into Swiss bank accounts, that is Egypt’s problem. No one is trying to charge the people who gave Mubarak or his henchmen their money and then let them re-deposit it with them, but it takes two to tango.

Whether or not a fraction of it actually helps the Ahmeds in the meantime, it is the Egyptian people who are held responsible for it all and must comply with IMF “adjustment programmes”, involving privatisation, deregulation, regressive taxation, an end to subsidies to the poor, and much more unpleasant “tough love”.

Egypt’s revolution momentarily shattered the complacency of this devilish scenario. The explosion under the weight of the grinding poverty the system produced caught the Western bankers and political leaders by surprise and they hurried to embrace the revolution and co-opt it when they realised it was inevitable. This culminated in the IMF’s offer of the loan to cover the yawning gap in Egypt’s first post-revolution budget, which will double the lowest salaries, improve social services and introduce a progressive income tax.

This unusual gesture of generosity by the IMF (a low interest rate and supposedly no strings attached) was really intended to keep Egypt from straying from the orthodox monetary fold, as other countries have done in the past in similar situations. It was enthusiastically supported by Egypt’s elite, largely trained at US universities in the arcana of monetary theory. “Otherwise, Egypt was about to be considered in default,” Hani Genena, senior economist at Pharos Holding for Investments told Al-Ahram Weekly. This is precisely what countries such as Russia, Argentina and Ecuador have done in the past.

The Higher Council of the Armed Forces, Egypt’s de facto ruler, was not impressed with assurances that the loans were “without conditions”, and General Sameh Sadeq told the government to cancel the loan, with its “five conditions that totally went against the principles of national sovereignty” which would “burden future generations”. Finance Minister Samir Radwan complied and hastily negotiated funds from Qatar and Saudi Arabia (countries with their own agendas for Egypt’s revolution) to plug the remaining hole. The spurned lover, the IMF, and its sidekick the World Bank, were not pleased. The latter said it would have to “review” its financial plans for Egypt.

As news of the loan tiff was breaking, US Senators John McCain, Joe Lieberman and John Kerry visited Cairo to offer their gift to the revolution: a bill in Congress to create “economic assistance funds” for Egypt and Tunisia. Recall McCain’s presidential campaign slogan to “Bomb, bomb, bomb Iran!”, and his and Lieberman’s militant support of Israel. If anything, their visit merely confirmed to Egypt’s military leaders the need to keep the IMF and its henchmen at bay.

Another visitor to Cairo last week was Mahatir Mohamed, who turned Malaysia into an economic powerhouse after extricating it from its colonial past. When his “tiger” economy was subverted by speculators in 1997, he stopped the run on the Malaysian currency and stabilised the economy without going to the IMF cap in hand, and Malaysia survived the crisis much better than the other “Asian tigers” who bowed to IMF pressure. “Malaysians refused the IMF and World Bank’s assistance because we wanted our economic decisions to be independent,” he told reports in Cairo this week proudly — music to Field Marshall Mohamed Tantawi’s ears.

In fact, many observers are convinced the army’s decision was in response to the same popular anger and national pride that allowed Mahatir to successfully defy the bankers in his day. “I felt a surge of pride when I heard the loan was rejected,” University of Cairo employee Mohamed Shaban told the Weekly. Egyptians intuitively understand Mayer Rothschild’s principle: “Give me control of a nation’s currency and I care not who makes her laws.” Egypt’s military leaders understand this too.

The process of petitioning the grudging financial centres of Zurich and London to recover at best a tiny fraction of the stolen billions that were stashed abroad and thus are responsible for an outsize part of Egypt’s foreign debt will take decades and yield precious little besides huge legal costs, as the experience of the Philippines and Indonesia shows.

Egypt indeed could consider defaulting on what is called in financial jargon an “odious debt”, referring to the national debt incurred by a regime for purposes that do not serve the best interests of the nation. The US did this to tear up Iraq’s debt in 2003. Ecuador did it in 2009. The latter (unlike the US in Iraq) even in compliance with international law. Greek citizens have already formed an Audit Committee to establish which parts of the national debt are “odious” or otherwise illegitimate.

But such a radical step would bring the collective wrath of the powerful world financial elite down on Egypt and is not an easy option. There is no longer a Soviet Union to turn to, as there was in the time of Nasser, when he dared defy the empire.

But neither is there any need to leave Egypt’s budgetary financing up to an elite of world bankers. Once a government realises that money is just a convention, something that it can use responsibly to grease the wheels of the economy, to generate employment and incomes, using the nation’s wealth for the people, it can responsibly create what money it needs, keeping a careful eye on what will increase production and wealth without putting too much pressure on prices. Taxation returns this money that the government in effect “loaned” to itself interest-free.

Michael Hudson, president of the Institute for the Study of Long Term Economic Trends and adviser to the Russian, Japanese and Icelandic governments, argues that Egypt has a “much broader choice” than Western governments in pursuing an independent financial and economic reform, as it still has nationally-owned commercial banks. It could set up a Recovery Fund for the Revolution without any need to borrow from anyone, using Egypt’s millions of unemployed — a force that can move mountains — as collateral, to create jobs which will automatically repay the money the government creates in new income and more tax revenue.

The plan to bring Toshka back to life by redistributing land to peasants and providing them with start-up capital is a perfect example of what must be done. There is no reason to “borrow” this money, especially from other countries, and worse yet to pay them interest. After all, investment in the country’s future is a risk that should be equally share by both the giver and taker of loans, in compliance with sharia law.

Hudson’s associates at the Center for Full Employment and Price Stability, the Levy Economics Institute, and the Center for Full Employment and Equity are now preparing a report for the Asian Development Bank on alternative monetary and fiscal policies to promote full employment and price stability without relying on IMF/WB funding.

Eric Walberg writes for Al-Ahram Weekly You can reach him at http://ericwalberg.com/

 

More articles by:
bernie-the-sandernistas-cover-344x550
February 20, 2020
Katie Fite
How the Military is Raiding Public Lands and Civilian Spaces Across the Western Front
Nicholas Levis
Bloomberg is the Equal Evil
David Swanson
Shut Down Canada Until It Solves Its War, Oil, and Genocide Problem
Thomas Knapp
Freedom for $5.30…and This Time Mexico Really is Paying for It
Nick Pemberton
Mr. Sanders: Would You like Your Coffee Without Cream, or Without Milk?
Rachel M. Fazio
A Trillion Trees in Rep. Westerman’s Hands Means a Trillion Stumps
Jeff Mackler
Break With Two-Party Capitalist Duopoly!
Rebecca Gordon
Impunity Guaranteed for Torturers (and Presidents)
Jacob Hornberger
The CIA’s Role in Operation Condor
Miguel A. Cruz-Díaz
Let Rome Burn
Jen Pelz
Reforming Expectations to Save Western Rivers
Maria Paez Victor
Canada Trapped By Its Own Folly
Binoy Kampmark
Pardoning Julian Assange: Trump, WikiLeaks and the DNC
Mel Gurtov
Poor Bill Barr
February 19, 2020
Ishmael Reed
Social Media: The New Grapevine Telegraph
David Schultz
Bernie Sanders and the Revenge of the Superdelegates
Kenneth Surin
Modi’s India
Chris Floyd
Which Side Are You On?
Linda Pentz Gunter
Hysteria Isn’t Killing Nuclear Power
Dave Lindorff
Truly Remaking Social Security is the Key to Having a Livable Society in the US
ANIS SHIVANI
Bloomberg on Bloomberg: The Selected Sayings of the Much-Awaited Establishment Messiah
Binoy Kampmark
Corporate Occupations: The UN Business “Black List” and Israel’s Settlements
Nozomi Hayase
Assange’s Extradition Case: Critical Moment for the Anti-war Movement
Howard Lisnoff
The Wealth That’s Killing Us Will Save Us: Politics Through the Looking-Glass
Yves Engler
Canada, Get Out of the Lima Group, Core Group and OAS
Nick Licata
The Rule of Law Under Trump
Sam Gordon
A Treatise on Trinities
Nino Pagliccia
Open Letter to Canada’s Prime Minister Justin Trudeau on Lima Group Meeting
John Kendall Hawkins
Just Two Kings Talking
February 18, 2020
John Pilger
Julian Assange Must be Freed, Not Betrayed
Peter Harrison
Religion is a Repeating Chapter in the History of Politics
Norman Solomon
The Escalating Class War Against Bernie Sanders
Conn Hallinan
Irish Elections and Unification
Dean Baker
We Shouldn’t Have to Beg Mark Zuckerberg to Respect Democracy
Sam Pizzigati
A Silicon Valley Life Lesson: Money That ‘Clumps’ Crushes
Arshad Khan
Minority Abuse: A Slice of Life in Modi’s India
Walden Bello
China’s Economy: Powerful But Vulernable
Nicolas J S Davies
Afghan Troops say Taliban are Brothers and War is “Not Really Our Fight.”
Nyla Ali Khan
The BJP is Not India, and Every Indian is Not a Modi-Devotee
Binoy Kampmark
Buying Elections: The Bloomberg Meme Campaign
Jonah Raskin
Purgatory Under the Patriarchy
Evaggelos Vallianatos
Herakles in the Age of Climate Chaos
Bob Topper
The Conscience of a Conservative
John W. Whitehead
We’re All in This Together
Gala Pin
Bodies in Freedom: a Barcelona Story
FacebookTwitterRedditEmail