There are two developing stories related to Egypt that will merit our attention over the next few weeks. First, there was the announcement on Wednesday that the Egyptian government has requested a loan (~$4.8 billion) from the International Monetary Fund (IMF). Christine Lagarde, Managing Director of the IMF, described her discussions with Egyptian officials as follows:
I congratulated President Morsi on his election and thanked him and Prime Minister Kandil for their kind invitation. I took note of their strategy and ambition for Egypt’s economic and social future, and I assured them of our continued commitment to support Egypt and its people during this historic period of transition. The IMF will accompany Egypt as it undertakes this challenging journey.There is a lively and heated debate in Egypt about both the conditions of and propriety of entering into a loan-agreement with the IMF, just as there was in May and June 2012 concerning the much smaller $200 million loan from the World Bank ("Egypt Emergency Labor Intensive Investment Project"). Parties from across the Egyptian political spectrum, from the secular left to the religious right, are opposed to the IMF loan for varied reasons with secular nationalists tending to advance arguments related to "dependence on the West" and religious parties arguing the impropriety of what are perceived as usurious conditions. Faced with a deepening recession and diminishing foreign-currency reserves, the Morsi government likely views entering into an IMF loan to be the simplest means 1) to increase public confidence in their fiscal plans and 2) to signal to foreign investors that conditions are ripe for their return. When the IMF's "technical team" ventures to Cairo in September, we can anticipate that the debate within Egyptian society will strengthen.
The IMF has maintained a close dialogue on economic policy with the Egyptian authorities since the start of the transition and provided considerable technical assistance upon request from the government.
The authorities have indicated that Egypt would like the IMF to support Egypt’s economic program financially to help the country recover and to lay the foundation for strong growth that benefits all. We are responding quickly to this request. A technical team will be arriving in Cairo in the early September to work with the authorities on their program and discuss possible forms of financial support from the IMF.
The second development of note is Egypt's announced proposal to form a four-state panel (Egypt, Turkey, Saudi Arabia, Iran) to deal with the crisis in Syria:
Egypt's foreign minister wants Saudi Arabia, Turkey, Iran and Egypt to meet for talks to work out how to end the Syrian crisis, Egyptian officials said on Sunday, a meeting that would include a regional ally as well as opponents of Damascus.While I personally have doubts about the efficacy of such a Quartet concerning Syria, it is noteworthy that the four states vying for regional influence might agree to some form of summit independent of conventional Western brokers. It is also interesting that this proposal coincides with Egyptian President Morsi's three-day trip to China and then Tehran, where he will hand over the Chairmanship of the Non-Aligned Movement to Iran.
Egyptian presidential spokesman Yasser Ali told reporters that setting up such a group would bring together nations which have "real influence" and described Iran as "part of the solution, not part of the problem."
What I find compelling about these two developments--granting that we are in the early stages of both the proposed IMF loan and the proposed regional quartet on Syria--is that they both speak to long-suppressed issues of Egyptian independence vis-à-vis the West. We witnessed moments of this last Winter during the NGO Affair, and we're seeing it with Egypt's slight flexing of muscle in Sinai. Certainly, one of the deep questions through the Egyptian revolution and subsequent political machinations has been that of the indebtedness (both literal and figurative) of Egypt to foreign, especially Western, states and organizations.
Meetings this week between the U.S. Government Economic Delegation and the Egyptian government may prove instructive, as I doubt that Egypt will be as quiescent as during the long Mubarak regime.