As the U.S and the IMF apply pressure to the Egyptian government to cut public spending and pay a high interest rate on debts incurred during the previous regime, the Egyptian government targets international NGOs with repressive policies
Story Transcript
SHIR HEVER, ECONOMIST, ALTERNATIVE INFORMATION CENTER: It has been almost two years since the revolution in Egypt, the ousting of President Hosni Mubarak, and the beginning of a new era.
The first democratic elections in Egypt were held, but the newly elected government now discovers that external forces are still in place, and if the government will not comply with the demands of global capital interests, dire consequences could apply to the Egyptian population.
Egypt’s referendum on the approval of a new constitution last December has passed with a small margin after only a third of Egyptians took part in the referendum.
Yet in addition to the political controversy, Egypt’s economic situation is in crisis. The Central Bank of Egypt published data comparing the economic situation in Egypt in February 11, 2013, to the same date two years ago. The numbers speak for themselves. Egypt lost nearly two-thirds of its foreign currency reserves, its currency has weakened, its balance of payments deficit has worsened, and unemployment has increased.
According to Farah Halim, a journalist and blogger of the Rebel Economy blog, policies implemented by the Egyptian government included increasing hiring in the public sector in order to reduce unemployment and gain public support.
Energy subsidies have been a way by which the government could ease the costs of living and support local industry even before the revolution.
The Egyptian Ministry of Finance, however, admitted on February 16 that the money for the subsidies is running out.
Egypt has accumulated a debt burden of 80Â percent of its GDP. Such a high debt rate makes it vulnerable to international pressure. Merely paying the interest on the public debt consumes a quarter of all of public spending.
Egypt’s overall budget deficit is expected to increase in 2013 to EGPÂ 135Â billion. Therefore, interest payments could quickly take up a larger portion of the public spending, dealing an additional blow to the standard of living in Egypt.
Nothing demonstrates the external pressure which restrict Egypt’s economic decision-making better than the U.S. intervention. The U.S. supports the Egyptian army with FMF (foreign military financing) of approximately $2Â billion annually, making it the second biggest recipient of aid from the U.S. after Israel.
This money does not flow into the Egyptian economy. The Egyptian army must use it to purchase weapons from the U.S. military companies. It does, however, give the U.S. significant influence over the Egyptian military. This influence was used to keep Mubarak in power between 1981 and 2011.
Egypt, which was once able to supply its food needs locally, has become increasingly dependent on food imports over the last decades because Mubarak’s government favored the business class and allowed much of Egypt’s fertile lands to become desert. Today Egypt must import more than half of its wheat from abroad. The U.S. exports to Egypt a quarter of Egypt’s wheat consumption, and France is the second biggest source of wheat for Egypt.
In February 10, the U.S. ambassador to Egypt, Anne Patterson, was not shy in making public demands for policy changes from the Egyptian government. She demanded that Egypt will conclude an agreement with the IMF (the International Monetary Fund), that Egypt will cut back on energy subsidies to the population, and that it will honor the financial obligations of the previous regime, essentially paying the debts incurred by the non-democratic Mubarak presidency.
Another way by which foreign interests are involved in the Egyptian economy is through non-governmental organizations (NGOs) and governmental agencies. Such organizations operate using foreign funding, and provide various projects in Egypt, including development projects, humanitarian assistance, and projects for promoting human-rights.
The Morsi government in Egypt is highly suspicious of these organizations and has taken steps to reduce their influence over Egyptian politics. Workers in many NGOs were encouraged to leave the country. Several offices were closed. The Egyptian government is now drafting a new law to restrict the operations of NGOs.
On the one hand, foreign aid disbursed through NGOs can be a subversive method to exert influence on the Egyptian political sphere and to exert pressure on the Egyptian government to play by the rules of global capitalism, meaning, for example, to abide by demands of the IMF and to repay debts which have been extracted from Egypt through corruption by a non-democratic government.
On the other hand, curbing NGO activity also harms local civil society and threatens the democratic process in Egypt. It raises questions about freedom of speech, freedom of organizations, and the ability of Egypt’s civil society to maintain links with the civil society in the rest of the world.
From an economic point of view, these NGOs support impoverished Egyptians, and provide employment for the Egyptian middle class. Egypt’s economy is dependent on foreign aid, which has already been dropping considerably because of the international economic crisis, from $22 per Egyptian in 2008 to only $7 dollars in 2010 on the eve of the revolution.
The Egyptian government must now choose between complying with international pressure, implementing austerity programs, and worsening the social conditions in Egypt, or defaulting on its debts and bracing itself for severe sanctions from the U.S. and international institutions.
This is Shir Hever for The Real News.
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