Op-Ed: Egypt’s al-Sisi Carries out Demands of IMF on Subsidies
More than a week after President Abdel Fattah al-Sisi slashed fuel subsidies by up to 80 per cent there have been virtually no street protests, violence, or massive strikes although there has been much grumbling.
Al-Sisi’s predecessors usually did little to cut the subsidies or if they did act often they backed down due to popular protests. No doubt many Egyptians are just weary of protests or worry about what happens when one protests these days in Egypt.
With the fuel price increases taxi drivers raised their fares causing many arguments with passengers. The government set new fares it claims took account of the increased fuel prices but the drivers insisted on higher fees. Dozens were arrested.
There was opposition from some political parties as well. The liberal El Dustor party claimed that the decisions hurt the poor and were passed too hastily and claimed in a statement: “It would have been more useful to look for ways to push economic activities, encourage investment, and adopt real austerity measures in terms of government spending,”
According to Prime Minister Ibrahim Mahlab, the cuts make available up to 50 billion Egyptian pounds to spend on education, health, and raising pensions. The hike in gas prices comes just after electricity prices were raised and then were followed by price jumps in the price of cigarettes and alcoholic drinks. Al-Sisi says the moves were necessary to revive the Egyptian economy claiming he is putting the interests of the nation ahead of any popularity he might lose do to the hikes.
He should have said that he had to do this to please the IMF in order to obtain a future loan to help keep Egypt afloat. However, he did not mention the International Monetary Fund (IMF) or the requirements for getting loans: “Was there another choice? By God, no. Could we have delayed it? It was already years late…But I have God first, and then all of you Egyptians,”
The increase in fuel, electricity and other costs is being reflected in the costs of other items. Taxi fares have increased but also the costs of vegetables and fruits since transportation costs increased. A former employee of the IMF said: The government is unlikely to succeed in controlling anticipated price jumps in markets, goods, and services vulnerable to such abnormalities in the wake of petroleum subsidy cuts in the new budget, unless it takes measure to protect the poor”.
Egypt is already suffering from the breakdown of services during an exceptionally hot summer. Taxi driver Mohammed Khalaf said: “To be completely honest, we have been hard done by. Passengers are screaming and every day there is an inspection by the police of our documents. I go home and there is no water and no electricity,”
The rise in costs in some cases negatively impact those who saw al-Sisi as on their side. Farmer, Araby Mahmoud who lives in the south of Egypt said: “I thought El Sisi was on the side of farmers, especially someone like me who has no income but what he gets from the land. I am like any other farmer, I have to repay loans I took from the bank and send my kids to university. The owners of machines that pump water to my land have raised their fee from 50 to 70 pounds for each acre. I don’t know what I will do.” The owners of the machines had to raise prices to pay for the increased cost of fuel.
El Sisi has taken some steps to ease the pain of higher prices by introducing a minimum wage for public sector workers, increasing pensions, and even making more foods available at state-run stores for discounted prices. However, the negative effects of the price increases may wipe out any benefits from these moves.
One source claims that al-Sisi is clearly on the side of the people: Making good on his pledge that the military will always be on the people’s side, he ordered the deployment of army buses in cities for the public to use in a bid to force taxi drivers to respect the state-imposed fares or risk losing business. Rather what al-Sisi is doing is trying to enforce the power of the state to implement economic policies dictated by the IMF: Previous Egyptian governments faced the dilemma of fuel subsidies but were unable to take action, leading to steady deterioration in government finances and frequent disagreements with the International Monetary Fund (IMF). The IMF made financial reform, including fuel subsidies, a priority for Egypt, and a prerequisite for IMF loans and an IMF clean bill of financial health for Egypt.
I include a video with an anti-IMF song by Seun Kuti. The lyrics contain “adult” content.
Kuti was active in protests against the removal of a fuel subsidy in his native Nigeria in 2012. While there is a great deal of corruption involved in the entire subsidy system in Egypt which includes a huge subsidy on bread, the reforms that are actually being carried out are designed to follow the dictates of the IMF rather than to improve the conditions of Egyptians especially less well off Egyptians.
Source: Digital Journal
