Committee for the Abolition of Illegitimate Debt

This paper seeks to identify the network, its participants, its roles and the struggles in which it will be active given the current political and economic stagnation we live in. First, we will quickly browse the history of debt creation in Egypt and the current status of debt in Egypt. Through that browsing, we can understand both the political economy of debt in Egypt and the social impacts of this process.

Who are we?

The Egyptian network for the abolition of debt and right to equitable development (ENADED) is a coordinating framework that gathers leftist activists, Human rights institutions, civil society organizations that are interested in struggling against the domination of capitalism, imperialism, and their economic policies both on the regional scale and the global one. The imperialist era that we live in is characterized by particular unequitable developmental policies. The public debt policies are at the center of the imperialist era policies on a global scale. Our network seeks to organize the struggle against these policies, especially the policies of indebtedness.

The network works with regional and global partners and comrades to develop more effective strategies of resistance. We seek to promote alternative policies for equitable development. The process of coordination with regional and global activists and organizations will help us develop our framework. The network works within the CATDM strategies of struggle against capitalist globalization and imperialist processes of debt creation.

Current status quo

In September 2017, 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 of Egypt (CBE) announced that the country’s external debt rose to $ 79 billion, a 41% increase over the previous year’s level. Egypt’s external debt during the fiscal year 2015-2016 was about $ 55.8 billion.

Short-term debt represented about 39% of foreign exchange reserves, while international standards considered that this level was still safe. Egypt’s external debt increased with the country resorting to the expansion of leveraged lending from international financial institutions and issuing international bonds to cover a gap in its balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. . The sovereign debt Sovereign debt Government debts or debts guaranteed by the government. market has seen a surge in foreign investment since last November as the floating of the local currency was introduced, with interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. rising by 700 basis points since then.

The Central Bank of Egypt’s evaluation of foreign debt level in the last fiscal year was higher than 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 ’s (IMF), which signed a loan agreement with the country in November 2016. In a report released this month, the IMF estimated foreign debt in fiscal year 2017 to be around $ 76 billion, and expected it to fall the following year to $ 74 billion.

These indicators about the increasing reliance on debt to finance the Egyptian budget deficit are even more alarming in view of the increase in public indebtedness in Egypt internally, where internal public debt reached nearly 200% of GDP 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. .

The local currency lost more than half of its value after the Egyptian central bank adopted a flexible exchange rate policy in November 2016. This crazy rise of the dollar against the Egyptian pound contributed to increasing inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. rates on a yearly basis to levels not seen since the mid-1980s. This has a dramatic impact on domestic consumption, which has declined especially in the lower classes, composed mostly of the poor working class and the marginalized farmers in the current Egyptian context.
The Egyptian economy in general entered stagnation from the mid-1980s because of debt creation policies, and the internal and external debt indicators reached horrendous levels despite the assurances of the Egyptian government and the Central Bank that the debt is still in the safe stage.

Egypt is also witnessing serious developments domestically in terms of deepening private indebtedness. The issuance of Law 141 of 2014 allowed the establishment of financial companies providing microcredit to citizens in Egypt, which is a dangerous development aiming to integrate the poor citizens in Egypt within the framework of globalized financial capitalism. Our network needs to confront these policies together with confronting public debt policies and working for fair and equitable alternatives in favor of the popular masses.

The debt issue and economic dependency

The debt issue was historically at the center of any social movement in Egypt, from the Orabi revolution in 1882 to the 1956 war. In 1956, the Port Said War was fought as the 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, 189 members in 2017), 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.

and the colonial powers refused the right for Egypt to nationalize the Suez Canal as a response to the World Bank’s policies which were depriving the country of funds to build the high dam on the Nile. The debt issue provided opportunities for popular movements in Egypt, leading to demands such as “national liberation” and “independent development”. As a result, the post-independence authoritarian state adopted a relatively socialistic discourse despite the fact that these authoritarian regimes also deepened the modernist distortion here in Egypt. But while the Egyptian post-independence economy relied on domestic manufacturing and import substitution strategies, it did not explicitly call for disengagement from the capitalist center.

Who is authorized to take responsibility for the disengagement from the capitalist center? The only way forward is the development of a new social movement. This movement will oppose both the traditional bourgeois classes and the globalized capitalist order in which they are integrated. The new globalized world we want to build will instead be associated with popular classes (poor peasants, marginalized workers, and city poor) victims of impoverishment. Hence, disengagement is the policy of the excluded. The preconditions for disengagement include the development of a political will for change. This principle also requires progress in the areas of democracy and collective rights, the unity of the Third World, and self-reliance by each nation. A multi-polar world is also a means of achieving disengagement. It also involves a strong form of non-alignment, allowing for various types of tactical negotiations.

Demands of the Egyptian network:

1. The first objective of the Egyptian Network is to struggle against Debt and for Fair Development, to immediately and unconditionally abolish Egypt’s foreign debt and to work to bring down the micro-debts from the poor citizens, abandon policies of stabilization and structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.
   
   Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).
   
   IMF : http://www.worldbank.org/ , counter microcredit policies aimed at citizens and advocate equitable economic and development policies in favor of the masses.
2. The network works first to establish audits of public debt, through the involvement of Egyptian citizens and their trade unions, parties, popular and student unions. The goal of this networking is to abolish all forms of illegitimate debt.
3. To struggle against the policies of micro-loans directed to citizens; to call on all institutions and NGOs working in the field of development to confront them and advocate alternative development policies that build the capacities of marginalized and vulnerable groups in the society; to struggle to replace the general economic policies favoring businessmen with economic policies that are in favor of the poor and the marginalized.
4. The network struggles for the abolition of all agreements with the International Monetary Fund and the World Bank.
5. The network will denounce all agreements (economic, political, military, etc.) which impinge on the sovereignty of the people and perpetuate the mechanisms of dependence.
6. The network will work together with the social and political forces to make the notion of illegitimate debt recognized in international law.
7. Rejection of all forms of conditions imposed by the creditors.
8. To struggle for recovering the assets and funds stolen by corrupt dictators with the collusion of local and international banking institutions and governments in the current and previous periods.
9. To take action to sue these financial institutions.
10. To struggle to eradicate hunger, poverty and inequality.
11. To struggle to ensure equality between women and men in all spheres of life.
12. To work towards the establishment of new financial policies through the strict control of the movement of capital and goods, the enactment of taxes on capital (comprehensive fees, taxes on wealth), the lifting of banking secrecy, the prohibition of tax heavens and of speculation in the financial markets.
13. To work towards establishing a mobilization of national resources that does not create indebtedness.
14. To work with all local, regional and international popular forces to establish alternatives freeing humanity from all forms of oppression: social oppression, patriarchal oppression, neo-colonial oppression, racial persecution, class oppression, political persecution, and cultural, sexual and religious oppressions.
15. To work towards an ambitious environmental policy aimed at restoring climate stability.
16. To struggle for the guarantee of economic, political and food sovereignty.
17. To struggle in order to replace the capitalist system focusing on the search for maximum 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. , growth and individuality, by a new society in which social and environmental needs are at the heart of political choices.
18. To work with all social forces to confirm the superiority of human rights over commercial law and to force governments, international financial institutions and corporations to respect various international instruments such as the Universal Declaration of Human Rights (1948), the Convention on the Political Rights of Women (1952), the International Covenant on Economic, Social and Cultural Rights (1966), the International Covenant on Civil and Political Rights (1966), the Convention on the Elimination of All Forms of Discrimination against Women (1981), the Declaration on the Right to Development (1986), the Convention on the Rights of Migrant Workers and Members of their Families(1998), the Declaration of the Rights of Indigenous Peoples (2007).