Amwal Al Ghad English - 2016-08-14 09:47:04
The International Monetary Fund (IMF) is stepping up lending in a region where economic reformers haven’t exactly had the most success.
Hoping to restore the confidence of foreign investors, Egypt announced an initial agreement Thursday to borrow $12 billion over three years from the IMF, joining Iraq, Tunisia, and Jordan in taking money from the Washington-based fund. Egypt’s programme is likely to see the government of President Abdel Fattah al-Sisi move toward a more flexible exchange rate, rebuild foreign-currency reserves, and cut spending.
The influx of capital offers an opportunity to restore economic stability in a region beset by political turmoil, terrorism, and the collapse in the price of oil, its most important export. While all the IMF borrowers except Iraq are fuel importers, they’ve received flows of aid and remittances from wealthy producers such as Saudi Arabia, which are now drying up.
The fund faces many of the challenges it encountered when it lent to Egypt and other countries decades ago, such as poor governance and public resistance to belt-tightening.
“The IMF is fighting an uphill battle,” said Jon Alterman, a former State Department official who’s now director of the Middle East programme at the Center for Strategic and International Studies in Washington. “The events of the last five years didn’t convince Mideast leaders that the Washington Consensus was right. It deepened their suspicions of opening up systems, for fear that if you open up, you invite political instability.”
The Washington Consensus, a term coined in 1989, refers to a mix of policies espoused by Washington-based institutions such as the IMF and World Bank that emphasizes budget cuts, open trade, and capital flows, and deregulation. The IMF, now under the leadership of Christine Lagarde, has softened its position on the need for budget cuts and conceded that capital controls can be useful in some situations. More»