Morsy and IMF chief confirm independence of Egypt’s economic policy making

Daily News Egypt
4 Min Read

By Noah Chasek-Macfoy

International Monetary Fund Director Christine Lagarde confirmed on Saturday that there are no preconditions placed on Egypt before the expected arrival of an IMF delegation at the beginning of next month to discuss Egypt’s request for $4.8 loan. Lagarde’s comments were made after attending a meeting with GCC countries in Riyad.

Egypt is currently facing a budget deficit that has swelled to 11 per cent of gross domestic product or roughly $57.8 billion.

Lagarde elaborated on the upcoming talks, saying “we are prepared for a partnership [with Egypt] but we require the publication of a national policy in order to be able to talk with them. President Morsy and his government are working to provide the required framework for such a policy right now.”

Lagarde’s comments came several hours before President Morsy made statements denying the influence of the IMF in shaping Egyptian policy and arguing that a loan is compliant with Islamic ethics during a speech at Cairo Stadium commemorating the anniversary of the 1973 October 6th war.

“I do not accept at all that Egyptians be fed off usury,” Morsy asserted during the speech in which he addressed the achievements of his first 100 days in office which conclude on Oct 7th.

Morsy’s comments addressed concerns of some among the base of his Muslim Brootherhood affiliated Freedom and Justice Party who reject the state’s heavy reliance on non-islamic financing. Morsy went on to justify his continued pursuit of the IMF loan saying “we have obtained a grace period of 39 months to begin repaying the loan and we will be paying 1.1 per cent [interest rate], is this usury?”

Lagarde’s comments were made in the context of conflicting domestic pressures on Morsy’s government in regard to the IMF loan. The IMF director’s comments clarify that the IMF is not dictating policy to the Egyptian government, but acknowledge that talks will not move forward until Cairo prepares a suitable program.

The IMF delegation to Egypt was postponed for a month last week to allow the government to finish developing their program to close the nation’s deficit. Morsy and his government have been working hard to create a national program to satisfy IMF requirements for economic development in order to secure the loan.

According to Reuters, Finance minister Momtaz Saeed stated last Monday that the restructuring of subsidies and taxes are the two main axes of Egypt’s economic plan. The finance minister added that the government is working diligently on studies and the reform programme should be finished soon.

Morsy confirmed in his speech that while subsidies must be eliminated, it is imperative that government support continue go to those who truly deserve it.

Despite the nation’s dire financial situation, and in addition to religious critiques, critics fear the dependence and subservience to western interests that might come along with the loan. Egypt has a long history of crippling debt to western countries being used to enforce political control beginning in the mid-19th century.

In response to these critiques, Morsy has made efforts to emphasise that his government’s policies are free from the influence or direction from the IMF.

In his Cairo Stadium speech, Morsy asserted in regard to the IMF loan that “after the January 25th revolution we will not allow anyone to dictate their will upon us,” and insisted that any connection between his plans to restructure butane gas subsidies and the application for the IMF loan are unfounded.

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