Pressures of WB on Egypt

Amwal Alghad

Economic experts assured that Egypt is in a weak position in the negotiations over the US$ one billion World Bank (WB) loan, as Robert Zoellick, the president of WB, said that Egypt’s foreign reserves is at its lowest point and expressed his fear of Egyptians’ pride and national sense that makes them sensitive to foreign intervention.

Farouk El-Ashry, economic expert and ex- high administrative committee member at Central Bank of Egypt, disagreed with Zoellick’s statement making Egypt’s economy status in a weak position hours before the arrival of WB mission to Cairo to negotiate over the US$ one billion loan.

El-Ashry added that this statement raises doubts about Egypt’s credit, as Zoellick said that the loan will be delayed until the governing system of Muslim Brotherhood, who obtained majority in the parliament, is known.

El-Ashry predicted that Egypt will be subjected to more pressures and conditions from the WB mission, the most important of which is continuity in privatization policies, raising energy prices, cancelling subsidies and more liberalization of local currency. Egypt, El-Ashry said, will likely reject these conditions.

El-Ashry added that Egypt’s economic status is at a critical position concerning scheduled foreign debts to 2050, as Egypt has to repay two installments in value to US$ 2.5 billion, the first one is US$ 1.1 billion, due in the first half of the year, and the second is US$ 1.4 billion, due in the second half of the year. The interest rates value of the two installments is US$ 651.8 million as the interest rate is 26.4%.

El-Ashry noted that WB mission will exploit Egypt’s critical position, liquidity status and the high value of internal and foreign debts, which recorded 92.4% of the gross domestic product by the end of past June and have worsened through the following 8 months.

Egypt’s debts value, El-Ashry added, is at a critical position as it exceeds government expenditures by 22%. Zoellick’s demand of delaying the loan till knowing the governing system of Muslim Brotherhood aims at guaranteeing Egypt’s dependency on the western countries.

Egypt’s negotiator is at a weak position as Egypt is subjected to political pressures more than the economic ones, as there are demands for liberating from the limits of International Monetary Fund (IMF), World Bank (WB) and the US aid, where the Egyptian government could have a key role in the Egypt’s economy.

Dr. Salah El-Dein Fahmy, professor of economics at Al-Azhar University, said that the IMF and WB are subjected to US administration which increases pressures on Egypt during tension times, but Egypt will not accept these conditions.

Fahmy called on the Egyptian government to be more flexible in dealing with WB mission as Egypt is currently witnessing critical circumstances. The Egyptian negotiator is at a weak position; however, Egypt was at a worse position during its negotiations with IMF in El-Sadat era, but it succeeded in having loans to finance the economic reform at that time.

Additionally, Dr. Atef Sedky, ex-prime minister in the beginnings of Mubarak’s era, succeeded in negotiations over increasing the foreign reserves to US$ 21 billion after it was less than US$ one million.

Egypt, Fahmy added, faces political, economic and social crises, but the Egyptian negotiator can stress the importance of Egypt’s regional position and readiness to implement economic reforms as conserving subsidies but not cancelling them. Fahmy criticized the Arab countries that conditioned their aids to Egypt on the WB loan.

Ahmed Koura, ex-head of the Egyptian National Bank, said that the WB is currently studying how the loan would be invested and methods of repayment as well as following up the investment process. WB would set conditions and demands due to Egypt’s current circumstances, as it witnesses security chaos and unclear political status and governing system as Egypt’s president is not elected yet.

Koura assured that politics plays an important role in granting loans, demanding that politics should serve economy not vice versa. Koura called on the Egyptian government to raise interest rates of dollar debt utilities in order to attract more foreign funds, so as to dispense such loans.

Source: Al-Ahram