CAIRO: A recent report by the Bank Information Center (BIC) listed Egypt as the biggest recipient of loans in the Middle East and Northern Africa region (MENA), borrowing heavily from the World Bank, among other institutions, during the past five years.
“Countries like Egypt lack capital, and so they need money from outside to help them develop, said Ahmed Galal, managing director of the Economic Research Forum, “supplementing domestic capital eases the process of economic growth and is useful for poor countries.
The MENA region has seen fluctuating loan rates during the last period, with 1990’s being a heavy borrowing stage, followed by a period of relatively low amounts of loans.
During the past five years, however, with more lending institutions in the picture such as the European Investment Bank, the rate of loans has significantly increased, with over 50% of the loans made to the MENA region going to Egypt.
Since 2002, Egypt borrowed $10, 272 billion from the World Bank, $283 million from the International Finance Corporation and $3 billion from the European Investment Bank.
According to Passant Fahmy, senior advisor at Egypt Saudi Finance Bank, the fact that Egypt is the biggest borrower in MENA does not prove anything since most of the countries in the region depend on oil.
“A country borrowing money is not wrong or shameful, as long as it has the ability to pay back those loans, said Fahmy. She added that the US is the biggest borrower in the world and yet it remains one of the most powerful countries.
The World Bank has declared that even though the loaning process has improved certain economic trends in MENA, the number of poor citizens has increased and 80 million residents in the region remain unemployed.
According to Galal, the World Bank claims the motto, “poverty reduction, and therefore in principle it is supposed to aid the poor citizens by supporting projects in areas such as education and health. However, Galal added, whether or not the poor will benefit from the loans depends on the country itself.
“If one wants to make a judgment, one has to ask what the money is borrowed for and whether or not it will be spent in a wasteful way, said Galal.
Fahmy believes that Egypt borrows in order to facilitate development and solve the existing problems in the country such as the water issue.
Another concern is whether or not those loans lead to increased foreign influence over the region.
Galal, however, disagrees and believes that there is a misconception in Egypt claiming that the World Bank is under the imperialism of the US, which he considers a way of “blaming our problems on somebody else, since Egypt does need the money and is responsible for how it is spent.
Fahmy also explained that “Economics is about financial relations, if the country is poor then it is more likely to be controlled than if it is borrowing money.