Open letter to the Egyptian President on the pending agreement with the IMF

30 August by Collective

Ahmed Hassan

In early September, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
is going to give to Egypt a “loan” of 12 billion dollars in exchange for lowering public spending, reducing the number of public employees, the phasing out of subsidies on consumer goods and a new privatisation program. Faced with the imminent signing of the agreement, five political parties, four NGOs and 170 public personalities issued on 14 August 2016 the following open letter to the President of the Republic.

Message from the national forces to Mr. President of the Republic

It is with concern that the national forces, signatories of this message follow the outcome of negotiations between the executive power and the delegation of the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
(IMF) currently visiting Egypt with the intention to grant a 12 billion dollar loan. It is with apprehension that we follow the extremely severe and merciless financial and economic measures that will impact the majority of the Egyptian people of the working and middle class. The executive power had already begun to implement these measures even before the announcement of these negotiations. And this while totally ignoring the whole population, its unions, its federations and its political forces.

The executive power has, in coordination with the Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
, proceeded to partial floating of the Egyptian pound (EGP), pending its total float, according to IMF conditions. Likewise, it presented legislation on public service and value added tax (VAT). It planned the sale of assets and properties of the Egyptian people, including banks and profitable companies, and, in an unfortunate economic situation where domestic debt rose to 2500 billion EGP [= €250 billion, $280 bn, £213 bn] and external debt reached $53 billion in March 2016.

If we take into account the announcement of the agreement on a loan of $25 billion to finance the construction of the Dabaa nuclear power plant, as well as $21 billion from the IMF, World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

http://worldbank.org
and other institutions, public debt has reached an unprecedented level in the contemporary economic history of Egypt. This at a time when some of the Egyptian, Arab and foreign investors stopped attracting capital in Egypt and another withdrew their capital to transfer abroad at a time when the tourism situation had deteriorated, the revenues of the Suez canal and oil had fallen significantly and the Egyptian currency reserves had shrank to nearly $15.5 billion by the end of July 2016.

The signatories of this message believe that the path taken by the executive power is a source of ruin since it was chosen from a narrow vision of the possibilities of resolving the socio-economic crisis, disconnected from the political crisis and based solely on the recommendations of the IMF. The experience of countries that have experienced similar conditions, such as Mexico and Greece and others, has shown that these recommendations were extremely harmful and that they risked aggravating the crises facing the country. Which can easily develop into a disastrous situation where countries in the region suffer threats of terrorism, fragmentation and demographic changes.

The signatories of this message categorically reject this path that leads Egypt into the trap of debt and dependency, paralyzing its power to make independent political decisions and crushing future generations with unbearable financial obligations, pushing the whole society to the edge of an economic and social volcano whose eruption would have incalculable consequences.

The signatories of this message therefore invite the President of the Republic to:
- Immediately suspend negotiations with the IMF and not sign any agreement relating to such negotiations;
- Implement a national economy bailout program to reform public finances and replace the economic model based on annuities and consumption by a model based on production and development;
- Suspend the ongoing privatisation program;
- Develop a social security for the poor;
- Retrieve Egypt’s looted treasures which remain inside the country and its capital that has escaped abroad;
- Integrate special funds |1| into the State budget;
- Remove energy subsidies for energy-intensive companies that sell their products at global prices;
- Remove export subsidies and state reserves;
- Reduce unnecessary public spending and Councillors wages |2|;
- Impose a tax on progressive income, according to the Constitution, a tax on stock exchange transactions and a tax on wealth, indebted only once;
Limit profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. margins;
- Fight against monopolies and corruption;
- Strengthen this struggle by all measures that contribute to the establishment of a political climate of openness to all the forces of society not involved in crimes such as terrorism and bloodshed, and this by the immediate and unconditional release of prisoners of conscience and their integration in society to take advantage of their skills and productive capacity;
- Repeal the scandalous laws such as the Law on Public Service |3| and the Act limiting recourse against fraudulent contracts, for contracting parties |4|
- Amend the law on demonstrations in accordance with constitutional freedoms.

The parties, organisations, groups and independent personalities who are the signatories of this message are aware that Egypt is, at present, at a crossroads. Sensing the danger which looms, they call the President of the Republic to adopt their proposals and recommendations and submit to him and to all the Egyptian people the compendium of the conference Facing economic and social challenges, which was held in May 2016, written by a group of patriotic experts and has an Egypt rescue program model covering many areas, away from the debt trap.


Signatories

Political parties
- The Socialist Popular Alliance
- Karama (Dignity)
- Egypt - Freedom
- People’s Stream
- The Egyptian Communist Party

Civil Society Organisations
- The National Forum
- The Independent Union of precarious workers
- The Legal group for human rights
- Egyptians against Religious Discrimination

Public figures

The list of the first signatories includes about 170 names including journalists, trade unionists, researchers, teachers, NGO leaders, artists, writers, lawyers, doctors, accountants and former Presidential candidate Hamdeen Sabahi.


Translated by Jenny Bright


Source: Tlaxcala

Footnotes

|1| In Egypt, every department and every public administration having contact with their users charge them with tax stamps and administrative fees that are not integrated into the state budget. Amounts recovered and used in the greatest opacity are equivalent to amounts two or three times the state budget, according to estimates.

|2| The Egyptian ministries are full of “councillors”, who are experts under private contract. Their job is primarily to present recommendations to the Minister on policy to be followed. Their monthly salary which is not subject to the public service pay scale often far exceeds the salaries of officials to reach hundreds of thousands of Egyptian pounds.

|3| This law, whose first version was rejected by a Parliament allthough submitted to the executive power, drastically limits civil servants salary increases and facilitates their dismissal.

|4| This law was passed following the cancellation by the justice of several privatisations of public enterprises, deemed fraudulent by the court. Appeals against these privatisations were filed by representatives of civil society. The new law makes such remedies impossible today, as they can now only be filed by the State or the company.

Translation(s)

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COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

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