Tuesday, January 17, 2012

The IMF and Egypt - Helping Egypt Help Itself

In all of the desperate grasping for how Egypt can be saved from the abyss of an impoverished, Islamist tyranny, the long overdue turn of the Egyptian government to the International Monetary Fund presents an opportunity for the world to help Egypt help itself. Apart from plugging a hole in the country’s finances – caused largely by haphazard decision and indecision of the successive interim governments over the past year – IMF-linked structural reforms offer an avenue for sustained change in Egypt.
The steady drift toward the reestablishment of a statist economy since last January 25 represents a key risk to the objective of establishing a modern and progressive Egypt.  Whether made in the name of the amorphous concept of social-justice, as an alleged anti-corruption drive or simply to usurp private assets to benefit competing businesses, the statist economic record has not helped the macro or micro economy, nor has it fostered the cause of reform.  Not only has a centralized economy proven to be an utter failure for Egypt over the course of the past sixty years, it also has confined political and social space by transferring individual opportunity and rights to an omnipotent and oppressive state (and the military’s shadow state). 
The IMF can help check this trend by reasserting the disciplines of the market.  Just working with a credible international financial institution will reassure battered domestic, regional and foreign investors of the country’s commitment to integrating itself with the global market.  The fear of the “conditionality” of IMF loans gets it exactly wrong, as it is precisely the prescription of a currency devaluation, cuts in inefficient fuel subsidies, streamlining public enterprises, the restarting an orderly privatization program and the introduction of transparent regulations, that will trigger opportunities for individual and collective advancement, and curtail the power of the state.   
Overcoming forward resistance
It also would be exactly the wrong type of help to give Egypt a pass on these conditions or to offer a special bail-out in the name of “stability”, as has happened so many times before.  That said, the European Union and the United States, Egypt’s two main export markets, must take more decisive and timely steps to granting greater access to Egyptian products, services and people, so as to allow the country to unleash its comparative economic potential. 
Egypt’s past experiments with the IMF, while highly imperfect in application, resulted in a period of sustained growth that helped, in part, create the very middle class that produced the core of the current stirrings for change.  It would be simplistic, of course, to deny that reform in Egypt is a process without very real economic, social and political challenges, but coming off such a low base and with its enormous human and natural potential, there is every reason to be hopeful of a much brighter future.  The world can, and should, help make this happen.   

No comments:

Post a Comment