The role of the IMF in Morsi's Downfall

The Role of the IMF In Morsi's Downfall
Posted: 08/07/2013 12:51

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By the time Morsi came to power as the nation's first ever democratically elected president, Egypt had experienced a drastic fall in both foreign investment and tourism revenues, leading to a 60% drop in foreign exchange reserves, a 3% drop in growth, and a rapid devaluation of the Egyptian pound. All this led to mushrooming food prices, ballooning unemployment and a shortage of fuel and cooking gas..

In order to arrest the slide towards complete economic collapse, Morsi needed to obtain loans and sources of investment as a matter of urgency. His first port of call was the IMF, who'd been in the process of negotiating a $3.2billion loan request from the previous regime before it was swept from power in 2011. Morsi wanted this loan increased to $4.8billion. However the IMF predicated the granting of any such loan on spending cuts, specifically cuts to the food and fuel subsidies to the poor, which still account for 3% of Egypt's GDP. In addition Egypt's massive state sector - which absorbs a further 40% of GDP - was also in the sights of the IMF, an institution whose neoliberal nostrums have wrought havoc throughout the Global South since the 1970s, eloquently documented by Canadian journalist Naomi Klein in her peerless work - The Shock Doctrine.

Morsi and the Muslim Brotherhood - a president and an organisation identified with the needs of the poor - refused to countenance cuts that would worsen their plight, though no doubt also anticipating an eruption of anger throughout the country if they had. In turn the IMF loan was stalled and Morsi was forced to try elsewhere. Loan requests to Germany and Russia were turned down, which left Egypt's regional allies as the only remaining source of desperately needed funds.

Qatar and Saudi Arabia loaned around $3billion each over the year of his presidency, Turkey loaned $1billion, and Libya $2billion, while Washington continued its annual subvention to the country of $1.5billion, much of which goes to the military in an arrangement that Morsi, for tactical reasons of trying to keep the generals mollified, did not interfere with.