As is true in every country that accepts the terms of an agreement with the International Monetary Fund, it is often said in Egypt these days that the IMF is seeking to impoverish the Egyptian people and burden the country with foreign debt, and that price hikes are a consequence of the agreement. The only problem with this narrative is that it’s wrong. The simple, regrettable truth is that our economic policy—or rather, the lack thereof—is what brought us to this point, compelling us to seek foreign loans and institute austerity measures.
Over the past two fiscal years, from July 1, 2014 to June 30, 2016, domestic public debt has grown from LE1.4 trillion to more than LE2.4 trillion, or from 80 percent to 85 percent of GDP, while unemployment remains stuck at 13 percent. External debt increased from $43 billion to $53 billion, while the pound has depreciated 40 percent in the parallel market. Inflation is up 6 percent overall, with food prices alone up 30 percent over two years. And this does not include the price increases of the past three months. Though they don’t show up yet in the official figures, people are already feeling the pinch.
If these are the manifestations of Egyptians’ impoverishment, then they have nothing to do with the World Bank, the IMF, the European Bank, or any other body we imagine to be conspiring against us. The only real conspiracy is the one we’ve perpetrated against ourselves. The dire economic situation precedes the IMF deal and its terms by many months.
Why bring up these figures when they trouble readers and inspire pessimism (and as all we know, pessimism is a crime)? Certainly not in defense of the IMF and World Bank, and in any case they need no defense since we’re the ones who turned to them for emergency assistance. Nor to spite the government and state officials, some of whom are making extraordinary efforts to find a way out of the current crisis. The economic situation and the people’s suffering are too serious for political point scoring.
My goal in recalling the source of our problems instead of blaming international financial institutions is to underscore the fact that specific economic policies brought us to this point. Relying on liquidity from new loans without policy changes will not resolve the crisis. In fact, it could exacerbate it if we exhaust all available borrowing ability in international markets and depend and Egyptians' readiness to patiently endure internally.
I personally see no alternative in the short term to resorting to the available financing to cover the urgent need for dollars, without which production will come to a standstill. But the state must be willing to review and revise the policies that brought us here. If in the coming weeks, the Egyptian people will take on additional $15–18 billion in debt—and it is the people, not the government, who are the borrowers; because it is they who will repay the debt and endure the accompanying measures—isn’t it fair to expect their government to reconsider its previous policies?
Shouldn’t we admit we wasted two precious years debating the new investment law without taking steps to encourage Egyptian and foreign investors or even heed their problems and needs and attempt to solve them?
Wouldn’t it be prudent for the state to reevaluate its megaprojects, which may have some long-term benefit but are moving ahead right now at the expense of existing public services and necessary infrastructure in existing areas where citizens actually live?
Isn’t it time to rethink the state policy of civilian and military intervention in every economic sector without a clear objective or assessment of its effects?
If the Egyptian pound is devalued, we’ll pay a price in the form of price increases and import restrictions. Shouldn’t we at least take advantage of the devaluation by having a clear plan to improve the quality of Egyptian goods and boost exports to markets that will be more competitive?
Is it enough to increase spending on social welfare programs to protect the poor and low-income groups? Or do we need a comprehensive social policy that considers education, health, employment, and public services—the pillars of social protection for every individual in society?
If the people are being asked to assume additional burdens, isn’t it reasonable to ask the state to be more transparent in its plans and initiate a genuine societal dialogue with input from unions, civil society, and political institutions?
And if the state expects the public to support it and its austerity policy and to tolerate further hardship, doesn’t this require fundamental changes in the political climate that restricts people’s freedom, denies them the chance to express their opinion and protest, and curbs young people’s participation in shaping the future of their country?
The coming phase will not be easy, and the cost will be high. And society, which will pay the price, has the right to demand an honest reckoning with previous economic policies, a break with failed measures, and progress toward a different economic and political climate if there is to be any genuine hope of overcoming the current crisis.
*The writer holds a PhD in financial law from the London School of Economics. He is former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investment.