Arab Spring Shock Doctrine? IMF, World Bank and Western Businesses See Oppurtinity in Exploiting Transitional Egypt, Tunisia
+As the policies advocated by the IMF and World Bank were among the most prominent factors contributing to the economic conditions motivating Egyptians take to the streets in protest, it is extremely concerning that the economic consequences of the uprising are being countered by the same institutions. It is well known that the World Bank and IMF serve western interests, many times locking developing nations into inescapable debt obligations, rendering them subservient to their political and economic mandates, regardless of their ultimately negative affect on the vast majority of citizens. Now is seen as a advantageous time to take advantage of the weak and chaotic transitions that the Arab Spring countries are in. Especially with the military in control in Egypt (heavily funded by the U.S. government), the economic policies and deals that are emerging are likely to be ones that perpetuate economic polarization and capital extraction in the favor of international/transnational investors and institutions. Now, not only do the people have to continue their revolutionary struggles to preserve and advance political gains, but just as important, they must organize to protect to the true power of the state, that is the economy, from being dominated and siphoned by external powers and internal elites. -PR+
IMF and World Bank’s aid tightens noose around poor nations
Public frustration with rampant unemployment, high food prices and privatization deals is believed to have helped spark the mass uprising in Egypt. At the suggestion of the IMF and World Bank, ousted President Hosni Mubarak sold public companies to local and foreign investors, while 40 per cent of Egyptians earned US$2 per day.
“It’s definitely a catalyst and the timing is very much related to what was tremendous financial deregulation and opening to privatization by external banks of Egypt and other countries and what has had dramatic negative circumstances,” says author and journalist Nomi Prins.
From RT News:
Egypt Officials Push U.S. Businesses for ‘Strategic’ Investment
Nicole Gaouette, Bloomberg, April 14, 2011
Egypt’s finance minister and its minister of planning appealed to U.S. businesses to invest in their country, warning that strategic U.S. interests are at stake if the transition to democracy fails.
“This is not about aid, this is not about assistance, this is about strategic interests,” said Fayza Mohamed Aboulnaga, the minister of planning and international cooperation, speaking yesterday at the U.S. Chamber of Commerce in Washington.
Aboulnaga and Finance Minister Samir Mohamed Radwan have spent two days in Washington meeting with administration officials and members of Congress to appeal for debt forgiveness, they said. They also talked with the World Bank and the International Monetary Fund.
Egypt faces mounting demands, a young population impatient for jobs that pay well, and a burgeoning deficit that the officials projected will hit $8 billion by June 30, the end of the country’s fiscal year.
To those who would rather “wait and see” whether to invest in Egypt, Aboulnaga said such a stance “could lead to irreversible consequences that will cost everybody a lot more than anybody can think if, God forbid, insecurity and instability prevail in Egypt and then, subsequently, in the region.”
Egypt would like the U.S. to forgive $3.6 billion in debt, the principal of which has been “paid over and over,” Aboulnaga said. Egypt is simply paying “interest upon interest upon interest,” she said.
G-7 Urges Europe’s Development Bank to Lend to Egypt
Sudeep Reddy and Anjali Cordeiro, The Wall Street Journal, April 14, 2011
The Group of Seven industrialized economies are urging Europe’s development bank to lend to Egypt and Tunisia as the two countries build new governments, Egypt’s finance minister said in an interview Thursday.
Egypt, two months after the overthrow of former President Hosni Mubarak, also faces a cash crunch amid a weak economy–hit by a loss of tourism revenue–and outflows of capital.
Samir Radwan, who took his post in Egypt’s transitional government this year, said leaders of the G-7 nations–U.S., Canada, Germany, France, Italy, the U.K. and Japan–met Thursday and agreed that the European Bank for Reconstruction and Development should make loans to the two countries. The European development bank, established in 1991, was created to invest in former communist countries in central Europe. The organization needs special approval to extend its role to Africa.
The development bank “is now authorized to deal with Egypt and Tunisia,” Radwan said in an interview with The Wall Street Journal and Dow Jones Newswires after G-7 leaders met. “They have given the EBRD permission,” Radwan said. “If I want to borrow I can go to them.” It is unclear if the G-7 endorsement is enough to get the development bank to make the changes or if there are other procedural hurdles.
During the past three months, Egypt’s reserves have tumbled from $43 billion to $32 billion. At least some of those funds are believed to have been used to shore up the Egyptian pound, which has been sliding.
So far, Radwan said, Egypt isn’t having problems servicing its debt. There is “no thought of default or anything like that,” he said. A big portion of Egypt’s debt is domestically held and the overseas debt has relatively long maturity.
Egypt is working with the World Bank, African Development Bank and Arab development institutions on funding packages to support its rebuilding effort. It is also “in conversation” with the International Monetary Fund but is waiting to determine its needs before deciding how to proceed with IMF funding, Radwan said.
“Egypt has been receiving tremendous goodwill from everybody,” he said. “We have the best of relations with the IMF. We have not requested; we have not rejected. We are watching the situation day by day.”
The nation also could borrow in private markets if necessary, he said. “We will start with a homegrown program and then we see the requirements.”
Financial leaders from the U.S., Europe, Middle East and North Africa also agreed Thursday on a “joint action plan” to target investment for “inclusive growth” in the Middle East and North African region, according to a joint statement released by France and the U.S.
“We stand ready to support these countries with responses coordinated with the international institutions, who can bring significant resources and expertise to aid the transitions,” the statement said. The countries said early recommendations by international groups would be presented before the end of May.
The World Bank this week said it is working with Tunisia to provide $500 million in loans, which could draw $700 million more from other institutions. That amount of funding would be “a drop in the ocean” for Egypt, Radwan said. “We will see the possibilities of leveraging whatever they have.”