Egypt needs to stabilize its current political climate to avail of much needed financial assistance.
The condition was implied by World Bank President Robert Zoellick, who told The Financial Times the lending institution will “want” to make sure there is transparency and broader social accountability in government, and that some of the changes “people were calling for” are in place before it decides to commit funding for Egypt. The bank received a loan request from the country amounting to $1 billion in early February.
A loan from the International Monetary Fund is in question as well. Farouk Soussa, chief Middle East economist at Citi, said Egypt is “far away” from closing a deal — worth $3.2 billion — with the IMF. He pointed out that the government’s clampdown on nongovernmental organizations — including U.S.-funded groups — shows the political climate in the country is “increasingly unpredictable.”
“I think the IMF will be less enthusiastic about lending,” Soussa said.
The IMF loan, however, is crucial to Egypt. Looming economic crisis is threatening to compound challenges in the strife-torn country, where citizens are clamoring for jobs, food and education. Security — which has never been good — is deteriorating as well. On Sunday, an Egyptian U.N. freelance consultant for a women’s fund was shot in the head while driving in an upscale Cairo neighborhood.
An IMF loan is what Egypt needs as guarantee for donors to follow through with their aid pledges.
Fayza Abul Naga, Egypt’s minister of planning and international cooperation, said in December that the country’s foreign debt has reached $34.4 billion, The Jerusalem Post reports. The debt, coupled with a depreciating currency due to falling foreign currency reserves, has worsened the country’s economic vulnerability. The fact that Egypt has only received a small percentage of donor pledges does not help: Saudi Arabia and Qatar have each given only $500 million of the $3.7 billion and $1.5 billion they have committed to the country. The United Arab Emirates has yet to make good of its promised $3 billion assistance.
At such time of financial difficulty, the country needs more friends than foes. But its actions of late have only led to strained relations with the United States, its largest donor. Now, annual U.S. assistance to the country is in jeopardy: some $1.3 billion in military and $300 million in economic aid.
Meanwhile, an EU parliamentary delegation canceled its planned visit to Cairo on Friday (Feb. 10). The delegation believes the latest events in the country have put into question the authorities’ legitimacy and commitment to a true dialogue with them and the Egyptian people. The announcement was made the same day a British woman working for a U.S. nonprofit group was arrested and barred from leaving Egypt.
Whether this would affect the $650 million aid package the European Union pledged recently, however, remains to be seen.
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