IMF: Delay Vote on Loan to Egypt

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(Washington, DC) – The International Monetary Fund (IMF) should delay a vote on a US$5.2 billion loan to Egypt scheduled for June 26, 2020 until robust anti-corruption requirements are included in the program and the loan terms are public, eight human rights and good governance groups said yesterday in a letter to the IMF executive directors.

On June 5, the Egyptian government reached an agreement with the IMF for a $5.2 billion Stand-By Arrangement, a flexible instrument that provides loans over a shorter time period and with fewer requirements than traditional IMF programs. An IMF news release noted that the purpose of the loan is “to support health and social spending, improve fiscal transparency, and advance further reforms to spur private-sector-led growth and job creation.” On May 11, the IMF’s Executive Board approved a separate $2.77 billion in emergency assistance to Egypt under another loan facility to support the government’s response to the Covid-19 pandemic.

“The IMF has repeatedly said that anti-corruption and public engagement are key elements of its strategy in the Covid-19 related economic crisis,” said Sarah Saadoun, business and human rights researcher at Human Rights Watch. “Yet, it is lending billions of dollars to Egypt without making the terms public or accounting for the high corruption risk.”

The groups that signed the letter are the Cairo Institute for Human Rights Studies; the Committee for Justice; the Egyptian Human Rights Forum; EuroMed Rights; the International Federation for Human Rights; the Freedom Initiative; Human Rights Watch; and Project on Middle East Democracy.

The IMF has not yet published documents that describe the loan program, making it impossible for the public to assess whether the agreement includes requirements to ensure that money is used transparently and that it includes sufficient safeguards against corruption. The Fund should change its practice of releasing such documents only after board votes to allow for informed public engagement regarding a potential loan. Documents related to the $2.77 billion loan in May have yet to be published.

In recent years, the Egyptian government has undermined the independence of its anti-corruption entities and weakened the role of the judiciary, significantly exacerbating corruption risks in the country. As the US State Department Country Reports have noted, the government does not effectively enforce its anti-corruption laws. The military's rapidly proliferating intervention in the Egyptian economy has also increased corruption risks as military-owned businesses lack any independent or civilian oversight, leaving the Egyptian public without access to information necessary to evaluate the costs and beneficiaries of publicly funded projects.

In March 2016, President Abdel Fattah al-Sisi fired Hisham Genina, the head of Egypt’s Central Auditing Agency, an independent body designed to act as a watchdog against corruption, after he reported that Egypt had lost EGP 600 billion (about $76 billion at that time) between 2012 and 2015, due to government corruption. Later, a court sentenced Genina to a year in prison for “spreading false news” regarding corruption in Egypt.

To ensure its independence, Egyptian law had provided the head of the Central Auditing Agency immunity from dismissal, but President Sisi issued a decree in July 2015, in the absence of the parliament, allowing him to dismiss the head of any agency.

In October 2019, the IMF released the final tranche of a $12 billion three-year loan to Egypt that was regarded as failing to address Egypt’s serious governance gaps. Austerity measures that the government made in addition to floating the Egyptian pound contributed to increased inflation rates and rising poverty with inadequate programs of social support.

After the loan was first approved in 2016, the IMF Executive Board adopted a new framework to improve how it addresses corruption in member countries. As recently as June 16, IMF Managing Director Kristalina Georgieva reiterated in an interview with Transparency International, an anti-corruption monitoring group, a commitment to consistently implement this framework. During that interview, she reiterated her view that “Entrenched corruption undermines sustainable and inclusive economic growth,” among other pernicious effects.

“Nearly 100 million Egyptians need to know that the IMF isn’t handing their government billions of dollars without proper controls to ensure that it actually goes to help those most hurt by the economic fallout of the pandemic,” Saadoun said. “The IMF’s Executive Board should live up to its commitment to transparency and fighting corruption and delay a vote until the terms are public and anti-corruption measures are in place.”