(to be published in Arabic for Arabi21)
The International Monetary Fund lends money that it never hopes to get back. The macroeconomic reforms that it stipulates as conditions for its loans always guarantee that the debtor will not be able to repay them. The Structural Adjustment Programmes of the IMF are designed to reduce state revenues; to hinder the ability of the debtor nation to pay back its loans. In other words, the conditions for an IMF loan are designed to keep debtor nations in debt, forever. This keeps them completely under the control of the IMF, which can dictate monetary, economic, and trade policy, how the government allocates its budget, wages for the public sector, investment regulations, and so on. It is worth noting that IMF loan agreements extend for periods that usually exceed the terms in office for any government that capitulates, essentially nullifying the importance of democratic elections if, and where, they may occur; no matter what government you elect, it will be bound by the same agreements.
On October 9th, the IMF is set to decide whether or not to grant Egypt a $12 billion loan; the biggest they have ever granted in the region. The conditions for this loan are standard IMF requirements. Egypt must implement a VAT taxation system, it must cut and eventually end food and fuel subsidies, it must freeze or decrease public sector wages, it must adopt a floating valuation of the Egyptian Pound, it must “do more” to facilitate and accommodate Foreign Direct Investment in the country, and of course, it must prioritise debt repayment above all else, to the detriment of any form of public spending. This forces the state to de-fund public sector areas like healthcare and education, which are then gradually privatized, and begin to operate exclusively for profit, rather than for the public good.
The groundwork for this loan has been laid for at least a year and a half. Egypt has been subjected to artificially created economic crises, always blamed on the political volatility stemming from the revolution. The country’s Foreign Currency Reserves were systematically depleted when foreign energy companies demanded payments from the government for oil and gas they were not given because it had been used to meet the needs of domestic consumption.
You see, the basic agreement between the state and energy companies is that each party is entitled to half of whatever is produced. The companies sell their half on the international market. If Egypt uses more than its designated share of its own oil and gas, it then “owes” the companies the equivalent of what they could have earned had they been able to sell it internationally. These “debts” ran into the billions of dollars, and Sisi was forced to make substantial payments within the first few months of his presidency, drastically reducing Egypt’s Foreign Currency Reserves. The depletion of these reserves , and the increasing demand of foreign companies to receive payments only in dollars, created a crisis which only the IMF could solve. It was an absolutely calculated scheme to push Egypt to the edge of financial collapse, precisely so that the IMF could come to the rescue (along with the World Bank and other smaller “development” banks).
Once Egypt adopts a floating valuation of the Pound, the $12 billion loan will certainly become impossible to pay, because the exchange rate will be determined, basically, by Egypt’s creditors themselves. In other words, if you had to earn 600 EGP yesterday in order to pay an installment of $100, they can decide that you have to earn 800 EGP today to make the same payment, and tomorrow it may be 1300 EGP. You will never be able to earn enough money because they will decide the value of your currency.
This is what you call “Debt Colonization”. Yet, at the moment of writing this, there is utter silence about the October 9th decision among Islamists, and every other “revolutionary” party in Egypt. It is still possible to derail this loan; to cause the IMF to withdraw from the deal, if the business environment in Egypt becomes too unstable. It is imperative for every faction to mobilize on this issue, to work together, to disrupt the profitability and operational efficiency of multinational corporations in Egypt; who are the beneficiaries of the IMF policies. If investors lose confidence in Egypt, the IMF will pull out, because there will be no point creating the legal conditions to facilitate parasitic investments if the conditions on the street are too volatile for them to flourish.