New York Times: Egypt to Try Pro-democracy NGOs Amid Growing Economic Crisis

Pressed by Unrest and Money Woes, Egypt Accepts I.M.F. Loan
The New York Times
By Liam Stack

CAIRO — Egypt’s transitional government announced plans on Sunday to sign a loan agreement with the International Monetary Fund worth $3.2 billion, less than a year after abruptly turning its back on a loan from the international lender, according to state media.

The $3.2 billion loan will throw a much-needed financial lifeline to Egypt, a country reeling from a year of economic crisis and social unrest after the ouster of the longtime strongman Hosni Mubarak a year ago.

The deal bears a striking resemblance to one Egypt’s military rulers negotiated, and abruptly rejected, last spring, citing concerns that it would saddle future governments with such a large debt that it would amount to a violation of Egyptian sovereignty.

Those objections appear to have been eclipsed by the country’s mounting economic troubles, which have grown increasingly dire as persistent social unrest has led to a collapse of the tourism industry and the flight of foreign investors.

Since October, seemingly monthly street clashes between protesters and security forces have killed more than 100 people and battered and burned much of downtown Cairo, leaving it divided by concrete walls and coils of razor wire.

The loan will be disbursed in three stages over the next 12 months at an interest rate of 1.2 percent , the state-run newspaper Al Ahram reported Sunday. The first installment, around $1 billion, will be delivered once Egypt signs the agreement in March.

The newspaper also reported that Egypt was negotiating a $1 billion loan from the World Bank, in part to make up for economic assistance pledged by Gulf Arab nations more than a year ago that never materialized.

Egypt’s foreign reserves have plummeted from a high of $36 billion, before the revolution, to around $10 billion in late January, as the government has spent vast amounts to bolster the currency, which has come under mounting pressure.

A devaluation of the Egyptian pound may be inescapable, economists say, raising the specter of increasing inflation and the potential for even greater social unrest.

The tourism industry, long a lifeblood of the economy, has all but collapsed since the revolution, and a steady drumbeat of anti-American sentiment in the state-run media seems likely to keep many visitors away.

Egypt’s military rulers may also be concerned about the possible loss of more than $1.5 billion of American aid over a dispute with the United States that has driven relations between the allies to a 30-year low.

Egyptian authorities have accused several nonprofit groups, including four supported by the United States, of operating without proper licenses and illegally receiving millions of dollars of American assistance in the last several years.

Criminal charges have been brought against 43 employees of the groups, including 19 Americans. Only seven of the Americans are still in Egypt, but they have been barred from leaving the country.

The American-supported groups include the International Republican Institute and the National Democratic Institute, which have close ties to leaders in the United States Congress. American officials have tried to defuse the crisis through diplomacy, urging the ruling military council to throw out the charges against the Americans or at least allow them to leave the country.

It is an effort that has so far born little fruit. On Saturday, Egypt announced that proceedings against the 43 defendants would begin in a Cairo criminal court on Sunday.