Eric Walberg: Egypt vs IMF - Time to Default?

It is no secret that Egypt has put all its faith in the US and Western international institutions since the days of Egyptian president Anwar Sadat, contracting a huge foreign debt, a process that was increasingly corrupt, despite the watchful eyes of various agencies. This debt is financed by foreign banks, and must be repaid in dollars, with interest. If much of the money they create, and then "lend" is siphoned off into Swiss bank accounts, that is Egypt's problem. No one is trying to change the people who gave Mubarak or his henchmen their money, and then let them re-deposit it with them, but it takes two to tango! Whether or not a fraction of it actually helps the "Ahmeds" in the meantime, it is the Egyptian people who are held responsible for all of it, and who must comply with IMF "adjustment programs" involving privatization, deregulation, regressive taxation, an end to subsidies of the poor, and a "heaping helping" of unpleasant "tough love". Egypt's revolution momentarily shattered the complacency of this devilish scenario. The explosion under the weight of the grinding poverty the system produced caught the Western bankers and political leaders by surprise and they "hurried" to embrace the revolution and co-opt it when they realized it was inevitable. This culminated in the IMF's offer of the loan to cover the yawning gap in Egypt's first post-revolution budget, which will double the lowest salaries, improve social services and introduce a progressive income tax. This unusual gesture of generosity by the IMF (a low interest rate and supposedly no strings attached) was really intended to keep Egypt from straying from the orthodox monetary fold, as other countries have done in the past in similar situations. It was enthusiastically supported by Egypt's elite, largely trained at US universities in the arcana of monetary theory. "Otherwise, Egypt was about to be considered in default". Hani Genena, senior economist at Pharos Holding for Investments told Al-Ahram Weekly. This is exactly what countries such as Russia, Argentina and Ecuador have done in the past.