Egypt’s economic reform proposals ignore social justice: Civil group

2 April 2012 by Bassem Abo Alabass

Proposed government plans to curb the country’s public debt to meet 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.
approval fail to address endemic poverty, a key cause of the revolution, say critics

Protester’s hand is daubed with a leading demand of the revolution: ’social justice’ (Photo: Reuters)

A group demanding the cancellation of Egypt’s debts has issued a statement condemning the interim government’s proposals for reforming the economy.

The Popular Campaign to Drop Egypt’s Debts (PCDED) claims new plans aimed at cutting the country’s public debt ignore longheld demands for social justice and will actually increase poverty in rural areas.

A copy of the government’s proposals obtained by Ahram Online last week showed that Egypt may raise sales tax as well as levies on property, alcohol and cigarettes over the next five years in order to secure $3.2 billion in IMF funding.

The moves are key to the programme’s declared goal of cutting public debt to some 60-65 per cent of Gross Domestic Product GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
(GDP) by the 2016/17 financial year.

A ’counter-report’ from PCDED claims that, if enacted, policies which set additional taxes on agricultural land and fail to increase subsidies for farmers will result in further poverty in Egypt’s countryside.

“The government ignored the social concepts in its programme such as education and health,” says Amr Adly, head of the social justice unit at the Egyptian Initiative for Personal Rights (EIPR), a pressure group.

He also believes it is unacceptable for an interim government to decide an economic programme that will be in effect long after it is replaced by other politicians.

“The government’s current mission will take a maximum of about one year, so how can we question them?” Adly wonders.

The governmental document said that new sales tax laws are currently being amended and will be ready for application in the 2013/14 financial year. Such changes will generate an additional 1.3 to 1.6 per cent of GDP, it claimed.

But this reliance on sales tax has also come under fire from campaigners who say new levies will hit rich and poor alike, as they buy many of the same staple goods.

“The plan does not include anything about progressive taxes [a tax by which the tax rate increases as the taxable base amount increases.] or setting maximum wages,” Adly told Ahram Online.

He also pointed out the large mismatch between annual subsidies given to Egyptian exporters, worth some LE4 billion ($662.8 million), and those given to farmers. The latter get just LE250 million ($41.6 million) per year, Adly said.

The Popular Campaign to Drop Egypt’s Debts garnered global media attention in October when it organised parallel events in London and Cairo calling for the cancellation of the estimated $36 billion Egypt owes to international debtors.

Source: ahramonline



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