Tuesday, December 11, 2012

The US: rewarding Arab obedience

"The United States and a coalition of international lenders are pushing ahead with billions of dollars in loans and other help for Egypt and neighboring states, despite the region’s sometimes violent political turmoil, hoping to head off a destabilizing economic collapse.
The risks involved in the effort have been on sharp display in Egypt in the clashes between protesters and forces loyal to President Mohamed Morsi, whose Islamist government must be trusted by the United States, the International Monetary Fund, the World Bank and others to deliver on commitments made in return for international support.  Diplomats and others involved in crafting the IMF program acknowledge that they are dealing with an unpredictable situation. Although agencies such as the IMF and the World Bank officially eschew politics in evaluating loans and projects, conditions in the Arab Spring states are particularly volatile. The uprisings in the region have produced grass-roots democratic movements applauded by the United States, but have also strengthened Islamist parties and led to violence such as the September attack on the U.S. diplomatic outpost in Benghazi, Libya.   The IMF had hoped to move forward this month on a $4.8 billion loan that Egypt desperately needs, as its foreign currency reserves dwindle and international investors pull money from the country. But over the weekend, Morsi reneged on imposing tax increases that the IMF had expected as a way to help bring down the country’s budget deficit.
On Tuesday morning, the IMF said that the Egyptian government had asked to delay further work on the loan “in light of the unfolding developments on the ground.” The tax hikes faced a public backlash at a time when Morsi is also trying to quell opposition to a proposed new constitution....
The EBRD, created after the fall of the Berlin Wall to finance economic transition in Eastern Europe, is funding small-business development projects in Morocco and a power plant in Jordan. By 2015, officials at the bank say, it is expected to be investing upward of $3 billion a year in Egypt, Morocco, Jordan and Tunisia."