Wednesday,20 March, 2019
Current issue | Issue 1121, 8-14 November
Wednesday,20 March, 2019
Issue 1121, 8-14 November

Ahram Weekly

Borrowing or not isn’t the question

Reaching an agreement with the IMF on emergency financing is less important than charting a bold vision for sustained future development, argues Ashraf Swelam

Al-Ahram Weekly

An IMF delegation is back in town for yet another round of negotiations with the Egyptian government. The subject of discussions is a standby arrangement that offers $4.8 billion in financing facilities to help shore up Egypt’s public finances and bolster its ailing economy. The arrangement stipulates a homegrown reform programme that addresses some of the immediate challenges at the heart of the country’s dire financial and economic situation.
Initiated by Samir Radwan, finance minister under both Ahmed Shafik and Essam Sharaf, and picked up by his successors, Hazem Al-Biblawi and now Momtaz Al-Said, negotiations continue to drag on despite worsening economic conditions. The elusiveness of the agreement stems from the lack of broad political support it requires.
Opposition to the IMF deal comes from many quarters and on various grounds. Revolutionary youth regard it as a continuation of Hosni Mubarak’s policies, hence unfitting for a new Egypt. Just the mention of the IMF brings on the wrath of socialists, communists, and those who oppose globalisation/capitalism as a matter of principle. Some Islamist forces oppose the agreement on religious grounds. Almost all criticise — rightly so — consecutive Egyptian governments for offering too little in terms of details.  
In contrast, supporters of the agreement highlight its necessity, not only to partially (yes, partially) cover Egypt’s widening budget deficit (estimated currently at above 11 per cent of GDP) and to resurrect its external financial balance, but also as an international vote of confidence in the Egyptian economy and its ability to overcome its current difficulties. Such a vote is crucial — the argument goes — for bringing out other facilities (mainly grants and debt forgiveness) to bridge the remainder of the public finances gap (estimated to be anywhere between $12-14 billion). Supporters also point to the importance of the agreement as a positive signal to investors, both foreign and domestic. They lash out at the opposition for presenting no realistic alternatives and for being naïve, uninformed or outright ignorant of the grim realities of the Egyptian economy and the urgency to tackle them.
The back and forth isn’t in itself a bad thing. For one, it shifts the focus from the political to the economic sphere, which is in dire straits. In addition, public debate of the sort unfolding around the issue of the IMF deal is characteristic of democratic societies, and as such it should be celebrated and encouraged. One problem with the current debate, however, is the lack of transparency and the complete absence of information about the details of the agreement. This in turn opens the door wide for unfounded suppositions and conspiracy theories. The responsibility to address this shortcoming lies squarely with the Egyptian government, especially in the absence of a parliament.
The government’s decision to launch a “Societal Dialogue” is a step in the right direction, but one that needs to meet the conditions of inclusiveness and full transparency. Discussions with political parties, business organisations, labour unions, nongovernmental organisations and research centres need to go way beyond the generalities that have thus far been shared, to the nitty-gritty details of the agreement.
What exactly is the government’s plan to get rid of wasteful subsidies, especially in energy? What is the timeline for replacing sales taxes with value-added taxes? What steps does the government intend to take to restore order to public finances? What are the costs of the agreement for future generations? And then, and superiorly more important, how does this arrangement fit into the broader vision of the government? This last question is to my mind the real question.    
While the 25 January Revolution was one with no clear leader, its demands — and the aspirations of the vast majority of the Egyptian people that inspired it — for freedom, social justice and human dignity, in their broadest definitions, are unambiguous. Those demands should have already been the cornerstones of a vision for the future. A vision that looks beyond addressing the country’s immediate need for financial stabilisation and the urgency of reigniting its growth and employment engines, as important as these steps might be to the much more daunting, but much more important task of outlining a long term plan to achieve economic prosperity and social wellbeing for all, with clear objectives and milestones, one that is mindful of the challenges and opportunities lying ahead.
For example, what to do with our bloated government bureaucracy, which currently stands at seven million employees strong (14 times the size of the French government) and consumes one quarter of the state budget? Hasn’t the day come for Egypt to seriously consider decentralisation and the financial and administrative empowerment of local communities? How are we going to rebuild Egyptian institutions and equip them to deal with the challenges of the 21st century? What is the future of Egyptian education, training and healthcare, and how are we going to capitalise on our demographic gift? How are we going to address the mounting challenges of water, food, energy and environmental security? How are we going to compete in the global economy and build the world-class infrastructure that it requires?
These are just a few examples of the serious questions that only a few of our political and economic elite have been focussing on. The answers to them and other critical questions constitute the contours of a vision for the future. In the absence of such a vision, signing an agreement with the IMF would be an exercise in futility. It is like jumping aboard the first available ship without making sure that its port of arrival is the desired destination. The result, at best, will be years of going around in circles.
Egypt’s vision for the future should be the subject of a “societal dialogue” very different from the ongoing one, with the agreement with the IMF an agenda item, not the other way around.

The writer is a former senior policy advisor to Amr Moussa and a Yale University World Fellow.

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