2023-06-28 18:13:17
Egypt, along with Tunisia and Lebanon, are suffering economically greatly, and the three countries are in dire need of loans from the International Monetary Fund. Reasons that impede the fulfillment of its commitments made during the negotiation.
These countries are struggling to import essential goods and support their troubled currencies, and indeed Lebanon defaulted on its debt in 2020. The three countries wanted to obtain a loan from the International Monetary Fund with the aim of increasing their foreign exchange reserves and reassuring foreign investors.
Egypt reached an agreement with the International Monetary Fund last December for a $3 billion loan, but since 2019, foreign exchange reserves have declined from $44 billion to $35 billion, and public debt has risen from 80% of GDP to 93% this year.
The Economist report indicated that investors, worried about the Russian invasion of Ukraine, decided to withdraw investments worth $22 billion from Egypt over the past year.
Egypt has devalued its currency 3 times since 2022, losing half of its value, and the price of the dollar has reached more than 30 pounds at the official rate, which is lower than the price on the black market.
According to the magazine, the powerful elites in the three countries impede progress in implementing the International Monetary Fund programs. She pointed out that the army in Egypt refuses to sell profitable assets and allow civilian companies to enter into competition with it.
In Tunisia, the Economist notes, trade unions, which frequently call strikes and paralyze the country, are refusing efforts to cut subsidies or the wage bill. As for Lebanon, there are the bankers and politicians who basically led the country to its current crisis.
Egypt
President Abdel Fattah al-Sisi’s government had hoped that the agreement with the International Monetary Fund would restore confidence, and pledged a flexible exchange rate and the sale of billions of dollars of state-owned assets, but the local currency is still overvalued, according to the magazine.
Egypt is facing a crisis in fulfilling its obligations in this regard, and Egyptian President Abdel Fattah El-Sisi announced that the exchange rate of the local currency cannot be liberalized if it would endanger Egyptian national security, in a clear message to the International Monetary Fund, which expects Egypt to implement its pledges regarding permanent transformation. to a flexible exchange rate regime.
Law abolishing tax exemptions.. Egypt is “flirting with Gulf funds”
Egyptian President Abdel Fattah El-Sisi announced that the local currency exchange rate cannot be liberalized if it would endanger Egypt’s national security, in a clear message to the International Monetary Fund, which expects Egypt to implement its commitments regarding the permanent shift to a flexible exchange rate regime.
According to the IMF statement, the program agreed upon with Egypt last December includes a package of policies, including “a permanent shift to a flexible exchange rate system to enhance resilience in the face of external shocks, rebuild external protective reserves, and implement a monetary policy aimed at gradually reducing inflation rates in line with objectives of the central bank.
According to The Economist, Cairo is trying to increase foreign currency reserves before moving towards devaluing the pound again, which is what investors want to reverse, and thus the Egyptian economy and its agreed-upon program with the International Monetary Fund reached a “dead end.”
And Sisi said during an event in the coastal city of Alexandria earlier this month that when it comes to approaching the exchange rate, “be careful because it has entered into a crisis beyond imagination,” adding, “We are flexible with regard to the exchange rate, but when the issue is exposed to Egypt’s national security.” And that the Egyptian people are wasted.. No, no, no.
However, this strong declaration was followed by the government’s approval of a draft law abolishing the exemptions granted to state agencies in investment and economic activities, as government agencies and companies used to obtain benefits that the private sector had long complained about, with regard to total or partial exemptions, whether on fees, customs, or taxes.
And the economist, Abd al-Nabi Abd al-Muttalib, considered at the time, in statements to Al-Hurra, that after Sisi’s statements regarding the exchange rate, the government bill is “a message to the International Monetary Fund that Egypt is continuing to implement its pledges, but according to the circumstances, as it faces problems in some pledges, but it is working to fulfill it.” In other aspects, it postpones other things such as the interest rate and the exchange rate.
Managing Director of the International Monetary Fund, Kristalina Georgieva. Archives
Egypt obtains the loan in installments, each of which is preceded by reviews of the steps Egypt has taken in order to continue granting it the next installment, but according to The Economist, the first review, which began last March, has not yet ended.
Tunisia
The size of the government debt in Tunisia represents about 80% of the gross domestic product, and the country, which suffers from political and economic problems, began its talks with the International Monetary Fund early last year.
Tunisia’s foreign exchange reserves decreased from $9.8 billion in 2020 to $6.8 billion at the present time. The country also faces frequent shortages of commodities such as sugar and rice, and pharmacies no longer have stocks of dozens of medicines.
According to Archyde.com, talks on a $1.9 billion loan have stalled since last October after an expert-level agreement, due to President Kais Saied’s categorical rejection of the idea of cutting subsidies and selling state-owned companies.
Said said that any required reductions in subsidies, mostly in energy and food, could have harmful repercussions for the country. According to Archyde.com, he referred to deadly riots in Tunisia in 1983 after the announcement of lifting subsidies on grain and its derivatives.
As the central bank governor, Marwan Al-Abbasi, said earlier this month, Tunisia is working with the International Monetary Fund on a fair economic reform program that takes into account the neediest groups.
Although most of Tunisia’s debt is domestic, there are external loan payments due later this year, and according to credit rating agencies, it may default, according to Archyde.com.
The term of the Tunisian president ends in 2024 after five years in power, as he proceeded with a series of measures described as undermining democracy, such as dismissing parliament and drafting a new constitution that would increase its powers.
Lebanon’s economic crises toppled the exchange rate of the lira. Archive – Expressionism Lebanon
As for Lebanon, which suffers from endless political and economic tensions, it reached a preliminary agreement, at the expert level, with the International Monetary Fund last April.
In a statement by the Fund’s experts last March, it was stated that “Lebanon is currently at a critical crossroads, as it has remained for more than three years facing an unparalleled crisis, and the sharp economic disruption, the extreme decline in the value of the Lebanese pound, and triple-digit inflation have had an amazing impact on people’s lives and livelihoods.” “.
He added, “Lebanon is currently standing at a dangerous crossroads, and without quick reforms, it will plunge into an endless crisis.”
In order to reach a final agreement, the fund demanded that Lebanon implement reforms, including the implementation of a medium-term financial strategy to restore the ability to keep debt within sustainable limits and create the necessary space to increase social and development spending.
He also called for credible restructuring of the financial system to restore its viability and support economic recovery, unify exchange rates and tighten monetary policy.
However, according to The Economist, there is still a slowdown in implementing such matters from the Lebanese government.
The country is run by a caretaker government that is unable to take necessary decisions, while the international community requires urgent reforms in order to provide financial support that helps Lebanon rise from its chronic economic predicament, according to AFP.
The political forces have failed to choose a president for Lebanon since the end of Michel Aoun’s term at the end of last October, which exacerbated the state of paralysis suffered by the institutions.
Impasse
The Economist’s analysis indicated that Sisi is not wrong when he fears that another devaluation will harm Egyptians, just as Said is right to worry about increasing poverty in Tunisia.
Egypt devalued its currency, cut subsidies and increased taxes in 2016, after signing an agreement with the International Monetary Fund for a $12 billion loan, but that caused painful inflation for citizens, without fixing the country’s underlying problems.
Al-Sisi had to go to the fund again to obtain another loan before paying off the previous loan in full.
Presidential elections are scheduled to be held in Egypt next year, amid difficult economic conditions, and in the last elections in 2018, potential candidates against Sisi were arrested and targeted, and relatives and supporters of a potential presidential candidate were recently arrested, the dissident Ahmed Tantawi.
The next elections in Tunisia are also approaching after the end of Kais Saied’s term, and as the magazine points out, it is difficult to expect change in the country.
And in Lebanon, the Economist says, in light of the sectarianism entrenched in the country, the Lebanese will likely continue to choose the same people who brought the country into its crisis.
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