Arab activists criticise conditions attached to western aid

27 June 2011, The Guardian

As Egypt rejects IMF loan, Arab NGO network says liberalisation advocated in aid packages poses threat to economic and social justice demands made during recent uprisings

Arab activists warned on Monday that conditions attached to western aid threatened to undercut the goals of economic and social justice at the heart of the Arab spring, following Egypt’s decision to spurn a loan offer from the International Monetary Fund (IMF).

The Arab NGO network for Development said liberalisation of trade, investment and deregulation advocated by the US and the EU as part of their aid packages had contributed to the unrest in the first place.

“Such conditionalities should not be reinforced through various forms of partnerships and aid packages promoted in the name of democracy support,” said a joint statement from 65 civil society groups. “The path to development of each country should be decided by its own people, via constitutional processes and national dialogue.”

The warning followed Egypt’s decision not to borrow from the IMF. The Egyptian finance minister, Samir Radwan, said on Saturday that Egypt would not borrow from the institution after revising its budget and cutting the deficit target from 11% to 8.6% of gross domestic product. The IMF said Egypt had scrapped plans for a $3bn loan agreed last month, a move that now calls into question the World Bank’s own loan. Radwan said Qatar had provided Egypt with $500m for budgetary support in the past week, and Saudi Arabia had offered a similar amount.

Counter Balance, which monitors the European Investment Bank, argued that western governments tended to confuse the transition to democracy with a transition to liberalisation because it served their interests. “The European Investment Bank, for instance – which will be lending the biggest share of EU money – has been active in the region for 30 years without tangible development results for the people,” said the group’s Caterina Amicucci.

The NGOs said that as late as September 2010 the IMF was still praising Tunisia’s “sound macroeconomic management and structural reforms over the last decade”, and was calling for more of the same by restraining public spending on wages and food and fuel subsidies.

“Those same economic models are now being promoted, as if nothing happened, via the conditionalities attached to the new aid package,” the Arab NGO network said.

Top officials from the African Development Bank, based in Tunis, have acknowledged that they were too blinkered in their approach to development, putting too much emphasis on economic growth and neglecting factors such as unequal growth, the urban-rural divide and income variation.

The Arab NGO network said if the west really wanted to support the region’s democratic movements, it should start by eliminating the conditions attached to aid, assess previous lending by development banks in the region, guarantee full transparency of any new aid, cancel debt taken on by former leaders, and renegotiate international trade and other economic commitments signed by past governments.

Egypt has £18.5bn of debt, much of it run by Hosni Mubarak, the Egyptian president who stepped down in the face of protests.

The Arab NGO network said that out of the €1.87bn (£1.6bn) lent by the European Investment Bank to Egypt between 2006 and 2010, 92% went on energy projects – and four-fifths of this to promote fossil fuels. Of the €1.8bn lent to Tunisia in the same period, half went to energy projects, and 10% was invested in infrastructure for transporting gas to Italy.

The G8 group of the world’s largest economies in May pledged $20bn in aid via the multilateral development banks to Egypt and Tunisia.