Foreign Policy

IMF Loans Will Additional Entrench Corruption in Egypt

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On June 26, the executive board of the International Monetary Fund (IMF) voted to disburse an additional $5.2 billion to Egypt. While purporting to offset Egypt’s economic woes, the funds will also be used to reward those still loyal to Egyptian President Abdel Fattah el-Sisi, who has overseen the torture of thousands of political prisoners, including Americans. Now, Egypt’s massive and ongoing counterrevolution can only succeed with the complicity of international actors who provide billions in financial aid to the post-coup regime. Instead of promoting structural reform of Egypt’s economy, the IMF loan will further entrench and protect an economy dominated by security services and state-owned enterprises.

Sisi rose to power after a military coup on July 3, 2013, that toppled President Mohamed Morsi, the country’s first democratically elected president since the founding of the republic in 1953. Sisi had the financial backing of powerful Persian Gulf monarchs with little interest in the spread of democracy in their neighborhood. This shored up Egypt’s faltering economy and ensured the survival of the new post-coup regime. The IMF loans to Egypt—totaling some $20 billion since 2016—now serve a similar function.

Hazem el-Beblawi is a key civilian figure in Egypt’s highly corrupt military regime under Sisi. As the interim prime minister after the 2013-14 coup, Beblawi presided over the bloodiest period in modern Egyptian history. His government ordered security forces to open fire on anti-coup protesters at the Rabaa sit-in in August 2013, killing more than 900 people in a single day. Unable to quell the protests with brute force alone, Beblawi’s cabinet then issued a protest law even more draconian than the assembly law issued by British colonial authorities in 1914, effectively banning public gatherings of more than 10 people. Beblawi now sits on the IMF executive board, giving him undue influence over funneling IMF money to his allies in the Egyptian government.

A U.S. citizen who survived an assassination attempt during the Rabaa massacre is beginning to expose the web of relations between the IMF and Egypt’s most notorious sycophants. A graduate of Ohio State University, Mohamed Soltan grew up mainly in the Midwestern United States, but was attending the Rabaa sit-in in August 2013 where he was shot by security forces. Soltan was subsequently imprisoned for almost two years and subjected to inhumane treatment, including being left alone in a cell next to a decomposing corpse. Prison guards encouraged him to commit suicide.

After a high-level intervention by the Obama administration, Soltan was finally released and sent back to the United States in 2015. In what could be a landmark lawsuit, Soltan brought a case against his former torturers. Citing the Torture Victim Protection Act, Beblawi stands accused of having “directed and monitored” the mistreatment of Soltan while he spent 643 days in prison.

Soltan brought the lawsuit against Beblawi on June 1, five years after his release from prison. On June 9 and again on June 15, security forces launched coordinated raids against Soltan’s family members across multiple governorates in Egypt. Five of his cousins were arrested at the same time from their homes in Alexandria and Menofia governorates. The security officers had no arrest warrants and gave no reason for arresting Soltan’s cousins. They did, however, reportedly tell his cousins that if Soltan drops the case against Beblawi, they would be released. On the same day, unidentified policemen visited Soltan’s father, Salah Soltan, in the Wadi al-Natroun prison. He has been imprisoned since the 2013 coup, and has now been moved to an undisclosed location. The message Sisi’s regime is sending to Soltan is clear: Drop the case against Beblawi or we will continue to hold your family hostage. This course of events seems to have done little to deter the IMF.

Soltan’s case is emblematic of the systemic financial corruption and egregious torture in Egypt. In March 2016, Sisi fired Hisham Geneina, the head of the Central Auditing Agency, after Geneina reported that Egypt had lost 600 billion Egyptian pounds (about $76 billion) because of official corruption. Geneina was subsequently sentenced to five years in prison. One of the state agencies that Sisi empowered with the mandate to “fight corruption” is the Administrative Control Authority (ACA). Although nominally a civilian institution, the ACA has surveillance powers and the ability to arrest and interrogate suspects. Sisi placed one of his sons in a high-ranking position in the ACA and has used the agency to tighten his personal grip over Egypt’s sprawling state bureaucracy. There are virtually no independent oversight agencies left in Egypt, meaning there is almost no guarantee that the IMF’s aid will not end up in the hands of sinister actors.

But it’s not too late to change course.

Eight human rights organizations have petitioned the IMF to ensure that mechanisms are in place that guarantee the $5.2 billion will be used not to reward Sisi loyalists, but rather for their intended purposes of supporting inclusive growth, improving fiscal transparency, and increasing social spending. The $5.2 billion will be disbursed over three tranches. While the first tranche will be released immediately, the subsequent two tranches will only be released after a review process. The release of the second two tranches should be conditional. At the very least, the IMF should require that an independent audit and report on how the initial IMF funds were spent be made available to the public.

The IMF has rightly identified corruption as a key threat to achieving economic stability in Egypt, but a corrupt system does not absolve individuals of responsibility. At the same time Beblawi served as prime minister, Mohammed el-Baradei was serving alongside him as vice president. On the day of the Rabaa massacre, Baradei resigned in protest over the slaughter of civilians. But Beblawi continues to act as cheerleader for Sisi’s brutal regime.

The new managing director of the IMF, Kristalina Georgieva, appears interested in tackling corruption. If she is serious, she should impose conditionalities related to governance and transparency on successive loans to Egypt. This should include establishing a truly independent agency to monitor the use of IMF funds. This could be done by restoring the independence of the Egyptian Central Auditing Organization and revoking the executive decree that now allows Sisi to appoint and fire the director. This would be a game-changing decision, sending a signal that IMF funds cannot be used as patronage for dictators. The IMF may also want to reconsider the optics of having Beblawi, whose cabinet presided over the Rabaa massacre and who stands accused of torturing a U.S. citizen, on its executive board.

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