The role of World Bank in egyptian economy

In June 2011, the international community was surprised by Egypt's announcement that it would not accept the offer of $3 billion in budget support from the International Monetary Fund (IMF). The first session explored the reasons for this rejection, in the context of wider political concerns about the role of international financial institutions, and discussed the implications for Egypt's transition.

Perceptions of the IMF and World Bank

Objections to the IMF loan largely centred on its perceived political impact. Specifically, there were concerns that foreign loans would place external conditions on the government, making foreign debt less attractive than local debt (although local debt is considerably more expensive in financial terms). Secondly, concerns were also expressed about the risk of increasing debt at a time when some Egyptians have been campaigning for debt relief. Thirdly, a participant also said there was concern that budgetary support could be misappropriated, as had happened with other public funds in the past.

There is considerable scepticism among Egyptian activists about the role of the IMF, World Bank and other international financial institutions. In many quarters they are seen to represent Western, especially US, interests. The World Bank's historical role in Egypt remains a source of resentment (its refusal to finance the construction of the Aswan High Dam in 1954 was said to have precipitated then- President Gamal Abdel Nasser's nationalisation of the Suez Canal). More recently, the World Bank and IMF were seen as praising the former regime, and indeed employed two senior ministers from the Mubarak era. Distrust of the motivations of international financial institutions seems to be shared by leftist civil society activists and by the military, two groups whose viewpoints often differ.

Another participant argued that in lending to the former regime, the IMF and World Bank had lost much credibility in the eyes of Egyptians. Their ability to press for reform appeared weak, and the benefit of their assistance therefore remained in doubt. Both institutions were perceived as having lavished praise on the Egypt government's policies over the past decade. Some participants noted that senior officials at both institutions have sought to present themselves in a more humble light and to acknowledge previous problems, but scepticism remains.

Conditionality

It was noted that there was a lack of awareness about the specific conditions attached to the loan among many participants. The IMF's only actual condition was that the government and the IMF would need to agree on a medium-term macroeconomic framework, but even this would not have been binding: it would have been a roadmap that would help to give an indication of the direction of future policy. One participant commented that it was possible the IMF had never offered a loan with so few conditions. The key conditions had been, firstly that the government should be transparent about how it used IMF funds and should have its spending independently audited; and secondly, that conflict of interest legislation should be addressed.

However, few participants were aware of these caveats; they were more likely to associate the IMF with policies on subsidies and privatisation. One questioned how seriously international financial institutions had taken the issue of corruption, asking why they had co-operated closely with the Mubarak government when it was clear at the time that corruption was a problem.

Dissatisfaction was expressed at a lack of transparency in the conditions attached to the IMF loan. Although the organisation claims to publish all relevant documents online, participants still perceived a lack of effort by both the IMF and the Egyptian government in explaining the agreed macroeconomic plan to the public. Conversely, it was said that opponents of the IMF loan had done a better job in promoting their campaign for the loan's rejection, although some unrealistic ideas had been aired, such as the argument that state assets that had been siphoned into foreign bank accounts by former officials would soon be restored and this would solve the country's financial problems.

It was suggested that civil society activists could have adopted a more constructive approach in order to turn the loan discussions to their advantage; rather than opposing the loan outright, they could have asked the government, IMF and World Bank to become more transparent, or could have asked institutions to focus on debt forgiveness or debt swaps instead. It was also noted that conditionality is not necessarily a problem in principle but that it depended on what the specific conditions were. If conditionality required the government to be transparent and accountable, for example, then this would ultimately have a positive influence.