Egypt IMF loan to hurt the country's poorest: on hold

Published Tuesday, December 11, 2012

The IMF said Tuesday that a proposed $4.8 billion loan to Egypt is on hold at the request of Egyptian authorities as violent protests mount in Cairo ahead of a constitutional referendum.

"In light of the unfolding developments on the ground, the Egyptian authorities have asked to postpone their request for a Stand-By Arrangement with the IMF," an International Monetary Fund spokeswoman said.

Either way, Egyptians have been concerned that austerity measures tied to the planned loan could hurt the most vulnerable, as spending on benefits and public services is cut. The loan agreement might also require the Egyptians to devalue the Egyptian pound which could lead to longer lasting inflationary effects, particularly harming the country's poorest.

IMF loans come with directives and strings attached; they generally work in favor of wealthier states and for the benefit of multinational corporations - often doing more bad than good in developing countries and ultimately deepening financial crises.

The IMF announcement that the loan would be postponed followed violent protests in Egypt over a deeply disputed constitutional referendum proposed by the Islamist president, Mohamed Mursi.

The IMF and Egyptian authorities provisionally agreed the loan on November 20. The IMF executive board had been expected to review the deal this month.

A week later, the IMF said that Egypt could still get the $4.8 billion loan despite fresh political turmoil as long as there is "no major change" in its reform commitments.

The loan is aimed at helping the government bridge financing shortfalls through fiscal 2013-2014 as the country rebuilds an economy left battered by the 2011 overthrow of the Hosni Mubarak regime.

Political instability has hammered the tourism industry in Egypt, the country's major source of foreign revenue; has scared off foreign investment, and has deepened the budget deficit.

(AFP, Al-Akhbar)

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