Bail-out or morale boost?
What were a host of World Bank and International Monetary Fund officials doing in Cairo last week, asks Sherine Abdel-Razek
Against the background of an impending war in the region and its possible effects on an already-struggling economy, a number of officials from the World Bank (WB) and the International Monetary Fund (IMF) converged on Cairo last week.
Representatives of the WB and the IMF met with Prime Minister Atef Ebeid separately, amid mounting concern in government and business circles over what a US attack on Iraq would cost the Egyptian economy.
Due to the usual hushed-up nature of the visits, unconfirmed rumours abounded in economic and business circles over whether the government was in negotiations for a new reform programme. This would be aimed at pulling the economy out of its three-year-long slowdown.
Asked about the potential impact of a US attack on Iraq, visiting WB senior vice-president and chief economist Nicholas Stern said that Egypt's tourism sector was likely to take another battering from any renewal of conflict in the region. Foreign direct investment was also likely to be hit, Stern said.
Mahmoud Ayub, the World Bank's Egypt representative told Al-Ahram Weekly that the visit was a show of solidarity with the Egyptian government against the ramifications of an attack. "We wanted to give the message that we stand beside the government in case of any military action against Iraq," Ayub said.
However, according to Ayub, the visits did not result in any new agreements between the Egyptian government and the WB.
"We have a number of ongoing projects with the Egyptian government," said Ayub. "This time we expressed our willingness to quickly disburse funds that Egypt might need later, provided that the government is taking steps to adopt the policy changes supported by the World Bank."
The Egyptian government has not yet made use of an $2.1 billion in quick disbursement funds, offered by the IMF, WB and the African Development Bank last Febuary during the Sharm El Sheikh donor meeting. Part of the funds, specifically that of the IMF, was linked to policy changes, mainly the exchange rate regime. "The government then felt that the improvement in its balance of payments due to declining imports bill and the increase in tourism revenues made the changes unnecessary," said Ayub.
While Ayub refused to comment on the government's currency regime, he said that the WB believes that the Egyptian government is making progress on a number of fronts, bringing it into line with WB policies.
"There have been steps taken to reform [the] customs system, improve [the] investment environment, and upgrade the social safety net to protect the poor," he said.
The IMF delegation, according to IMF Resident Representative in Cairo Nadeem Haque, were in Egypt for a regular bi-annual visit. These visits are part of the IMF's review of its policies.
Haque said that, "the IMF cannot speculate [on] what the effect of the war will be on the Egyptian economy." He declined to comment on whether the delegation discussed the possibility of extending policy-based IMF facilities to Egypt in case of war. However, he stressed, "it is the role of the fund to help any economy worldwide [during] times of crisis."
