By Patrick Werr and Marwa Awad / Reuters
CAIRO: The Egyptian Muslim Brotherhood’s political wing supports Egypt’s request for an IMF loan, but first it wants the government to produce a coherent plan to battle corruption and get costs under control, its economic policymakers say.
The government said earlier this year it had formally requested a $3.2 billion International Monetary Fund loan to stave off a financial crisis after more than a year of political and economic turmoil.
The IMF has asked Egypt to draw up an economic reform plan with benchmarks and targets, line up aid pledges from other donors and sell the plan to the country’s political forces, especially the Brotherhood’s Freedom and Justice Party (FJP), which won nearly half the seats in the new parliament.
Analysts say any reservations the Brotherhood has about the IMF are largely based on concerns of a public backlash against the Washington-based lender, which in the 1990s imposed liberalization policies that were later blamed for hurting the poor.
The Brotherhood may have no choice but to accept an agreement in the end, but it seems to be following a strategy of delaying as long as possible while calling for austerity and emphasizing it is not opposed to foreign borrowing.
“We are not for the agreement nor against it. This is the responsibility of the government,” said Saad Al-Hoseiny, a member of the FJP and chairman of parliament’s Planning and Budget Committee.
“The government will take this step, and we will not prevent it. But we want to be certain that it goes along a sound economic path and does not resort to borrowing as the easy way out,” he told Reuters in an interview this week.
The IMF said on Thursday it was studying a document the Egyptian government had given it and expected to send a mission to Cairo in the second half of March.
The Brotherhood, whose members include entrepreneurs and established businessmen, broadly supports a market economy, although it says it wants greater social justice.
No interference
Ahmed Alnaggar, a member of the FJP’s internal economic committee, said the program outlined by IMF regional director Masood Ahmed in a meeting with FJP leaders in January had no demands that touched on Egypt’s sovereignty.
“The terms (of the loan) are good. The interest rate is 1.1 percent. There are no conditions that we see as interfering in internal politics. The IMF stressed that fully in the meeting,” he said.
The IMF told the FJP it had changed its approach to lending to be more efficient and to bolster its image in developing countries.
Since then, the FJP had only received a summary of the government’s 18-month reform plan, not the whole document, he said. It got more details in a broad policy statement that Prime Minister Kamal El-Ganzoury read out to parliament on Feb. 28.
Hoseiny said the government had also been meeting with parliament to build support for an IMF loan.
“Our reply to this loan will be part of our reply to the government program as a whole in parliament,” he said, adding that he expected a vote within three weeks.
However, the FJP would move more quickly if the government submitted its reform plan before then.
“We’re here sitting,” Hoseiny said.
The FJP wanted the government to streamline expenditures, improve security in the country and make a serious attempt to combat corruption, which was a drain on the budget and was dampening the political will for a loan, he said.
The FJP also wanted the government to exhaust all other options to increase its revenue, including selling Islamic sukuk bonds to foreign institutions and plots of land to Egyptians living abroad, Hoseiny said.
If properly done, the sukuk sales could raise as much as $10 billion, far more than the central bank’s estimate of $2 billion, and the land sales as much as $15 billion, he said.
Government plan
“If we see that there are clear plans and ideas, that they pledge to deliver, then okay, we will agree,” Hoseiny said.
Alnaggar said the FJP wanted to see the actual program the government would present to the IMF and not a hypothetical one or a summary.
“We have no problem with the IMF,” Alnaggar said in the interview. “We are a member country and it is our right to take out a loan, especially since the IMF was set up to intervene to resolve urgent balance of payments deficits.”
“We have an urgent balance of payments deficit, and therefore we have a right to use it.”
Egypt has spent more than $20 billion in foreign reserves since last year’s uprising to prop up its currency. Reserves now stand at a worryingly low $15.7 billion, including $4 billion in gold bullion the government would be loath to draw down.
Alnaggar said the FJP agreed with many of the measures in the government’s 18-month program, including the widening of the country’s current 10 percent sales tax to a full value-added tax in the financial year that begins on July 1, 2013.
“They are requesting this, and we’re moving in that direction,” said Alnaggar. “We see that activation of the VAT starting in 2013/14 is something very suitable. We don’t have a problem.”
Hoseiny said the FJP also agreed to the government’s plan to reduce subsidies to energy-intensive industries as long as the poor were not hurt.
“All their talk is about removing subsidies and on raising the price of gasoline and diesel. But there is an acceptable side, which is removing subsidies on heavy industries. This is an acceptable side,” Hoseiny said.
“If we see that there are clear plans and ideas, that they pledge to deliver, then okay, we will agree,” Hoseiny said. “The ball is in their court.”
“We don’t want to take the easy route out, but we don’t want to appear to global institutions that we have a closed economy or that we have a stance against them. This is not true,” he said.
