On the IMF and Egypt

IMF U-Turn in Jordan Shows Egypt Need to Engage Public on Policy

Alaa Shahine and Mohammad Tayseer, reporting for Bloomberg:

Mohammad al-Sheikh was among hundreds of Jordanians who joined protests against an increase in fuel prices, pushing King Abdullah II to scrap a policy aimed at meeting pledges to the International Monetary Fund.

“The government increased the prices in secret, like it was afraid of something,” al-Sheikh, an air conditioning salesman, said in an interview in Amman, explaining why he joined a street protest for the first time in his life. “This is provocative. We have the right to know.”

Al-Sheikh’s comment signals the new engagement among Arab citizens after the protests that brought down governments last year. A consequence is that the fiscal restraint backed by the IMF and investors is harder to implement without the kind of broad support that requires a public debate. That’s especially resonant in Egypt, where talks with the IMF on a $4.8 billion have been on and off for more than a year.

Mohamed Mursi, Egypt’s first freely elected president, already faces near-daily strikes by labor groups empowered by last year’s uprising. After campaigning on the promise that he had a detailed plan to end Egypt’s worst slump for a decade, Mursi is coming under fire for stalling on the specifics of what his government will commit to in return for IMF money.

“If I were the government I would start talking in a language that the average man on the street would understand,” said Mohamad Al-Ississ, assistant economics professor at the American University in Cairo. “A quick solution is going to bring down the government with it.”

International financial institutions cannot reveal their own demands without the approval of the government. So there has to be more pressure on the government to reveal the terms of the loan — and sell it to the public — than before.

The irony about the current situation is that for much of 2012 the IMF did not want to go ahead with the loan (unlike the World Bank) because parliament was contesting it as part of the MB-SCAF-Ganzouri cabinet fight. But now that there is no parliament but an elected president, the IMF appears satisfied that there is consensus! The Qandil government might be better than the Ganzouri one — in fact it almost certainly is more coherent, at least — but the current negotiations are essentially taking place with one political group (the Brothers) and the technocrats at the Ministry of Finance, whereas at least beforehand there has been consultation with the broader political spectrum.

Yes, there is a risk that this simply become about the politics rather than the merits of the plan — after all the MB itself opposed the plan under a certain set of political circumstances but now unreservedly endorses it, even dropping ethical objections to the fact that IMF loans are not disbursed under Islamic finance principles. But surely that was the point of making a fuss about democratic accountability and consensus in the first place, no?