While Egypt’s government has moved quickly to impose a series of economic measures in the past few weeks, culminating with the International Monetary Fund’s executive board’s approval to grant the country a US$12 billion, three-year loan, Parliament has been fairly silent.
Article 127 of the Constitution stipulates that the government may not borrow or procure funding or be linked to a project that is not listed in the official state budget until it has received Parliament’s approval.
Aside from the IMF loan, Parliament did not discuss or approve the over $2 billion that the Central Bank of Egypt secured in loans last week. The legislative body also did not address the Finance Ministry’s decision to issue $4 billion in international bonds on the Irish Stock Exchange.
The website for the Ministry of International Cooperation lists the developmental projects through which Egypt has obtained loans and grants from donor states and international organizations. According to the available data, Egypt secured a total of 62 grants and loans in 2016 valued at $4.6 billion, excepting the value of the IMF loan.
Parliament convened to discuss each of these loans except two: a World Bank loan valued at $500 million and a loan from the Japanese government to continue construction on the Egyptian museum amounting to $475 million.
Minister of International Cooperation Sahar Nasr stated in September that Egypt had attracted $15 billion through various funding packages between September 2015 and September 2016. However, the list of projects and funding published on the ministry’s website shows that the government procured approximately $10 billion over this period. Information regarding the projects that will receive the remaining $5 billion is unclear.
The Ministry of International Cooperation’s data does not include, for example, Egypt and China’s $2.7 billion currency swap agreement that was finalized at the end of October, which was a step toward satisfying the $6 billion preliminary financing approval condition within the framework of the IMF loan.
After parliamentary elections had closed and days before Parliament was to convene in December 2015, President Abdel Fattah al-Sisi issued a presidential decree to finalize a $3 billion loan from the World Bank.
When Parliament did convene, the government presented it with the laws and presidential decrees that had been passed in the period preceding its assembly for review. However, these did not include Sisi’s approval of the World Bank loan. The presidential decree was also not published in the Official Gazette, which is where finalized laws are announced. Egypt received the first installment of the loan in September.
In addition to these loans, Egypt is waiting to receive the largest loan in its history from Russia, which is valued at $25 billion and will be used to build the Dabaa nuclear power plant. The loan was published in the Official Gazette without being discussed in Parliament.
Egypt also received a number of deposits in 2016 from the United Arab Emirates and Saudi Arabia that were not discussed by the country’s legislature. According to a report issued by the Central Bank, Egypt had received $14.9 billion in deposits by the end of 2015, which was 31.2 percent of the total external debt at the time.
Egypt’s total external debt rose 16 percent by the end of June, increasing from $48 billion at the close of 2015 to $55.8 billion, according to the Central Bank.
Including the $12 billion IMF loan in calculations, there will be around $40 billion in loans that have not been approved by Parliament. The figure would be higher, if we were to add the packages included in the IMF funding scheme: the $6 billion in required funding before dispersal and $9 billion in assisted funding to be procured afterward. This $9 billion is divided between $3 billion in bond sales guaranteed by the IMF and an additional $6 billion provided primarily by the World Bank and the African Development Bank, among other funding sources.
Shawky al-Sayed, a professor of constitutional law, confirms that loans received by Egypt through bilateral agreement with other countries have to be approved by Parliament. Loans received without parliamentary approval represent a “constitutional flaw.”
Mohamed al-Agaty, the director of the Arab Forum for Alternatives, is not surprised by the legislative body’s diminished role, saying that the state had designed Parliament to facilitate the government’s agenda, a reference to security interferences in the composition of the 2015 Parliament. While he asserts that the Egyptian government does not fear parliamentary oversight, it may be the case that the government has surpassed Parliament to expedite the financial procedures.
But this does not mean that all members of Parliament were content with the government’s approach.
MP Mohamed al-Sadat questioned the Egyptian-Chinese currency swap agreement during the November 13 parliamentary session, demanding that the government provide further information regarding the deal’s conditions.
MP Haytham al-Hariry similarly presented a statement to Parliamentary Speaker Ali Abdel Aal addressing the government’s decision to overlook Parliament’s role in the IMF deal. The statement, which Hariry published on his Facebook as well, said: “From officials’ statements, it seems that Egypt in fact received the first payment of the loan, while international bonds were issued without parliamentary approval.”
Egypt has received the first tranche of the IMF loan, a sum of $2.75 billion.
Meanwhile, in statements published by the privately owned Al-Shorouk newspaper last week, Prime Minister Sherif Ismail stated, “There is no need to present the modifications that will be made to the state’s budget as a result of the latest economic decisions to the House of Representatives now, since the program for financial and economic reform that the government submitted to Parliament already included these procedures.”
Nonetheless Hassan Issa, head of Parliament’s Planning and Budget Committee, said that he expects the IMF agreement to be submitted to Parliament for approval within 10 days, according to the privately owned Al-Borsa newspaper.
Ali Messelhi, the head of Parliament’s Economic Affairs Committee, confirmed this: “Parliament understands the situation well, and the agreement will be presented to Parliament within days.”
Parliament’s Economic Affairs Committee discussed approval of a 65 million euro agreement on financial cooperation between Egypt and Germany during an October 30 meeting, nearly two years after the deal was signed. MPs and Nasr became engaged in a heated conversation over the efficacy of the loans and the guarantees that they will achieve their purpose.
Quoted in Al-Shorouk, MP Medhat Sherif addressed the meeting, saying that MPs “previously asked for detailed plans that did not materialize. That’s why we need these projects to be presented to us in detail. We have to know the terms of these loans and where they will be allocated, especially considering our mission is to review these processes.”
The controversy began again when Parliament’s Economic Affairs Committee and its Energy and Environment Committee met on November 6. MP Atef Abdel Gawad, a member of the government-backed Alliance to Support Egypt as well as the Energy and Environment Committee, said that MPs had been rendered useless. At the close of the meeting, the committee recommended that the government stop issuing unilateral decisions without consulting Parliament at the start of next year.
Several international financing organizations, including the World Bank, mandate that governments must abide by the terms of national constitutions and legal statutes.
A research paper published by the Egyptian Initiative for Personal Rights titled “Five Objections: What is the Program with the World Bank Loan?” explained that the bank violated its terms in December when it overlooked the necessity for the loan to receive parliamentary approval.
The World Bank also stipulates that a poverty and social impact study must be conducted to ascertain the effects of the policy program imposed by the loan. However, the bank’s Egyptian program documents contained no analysis of its social impact.
Salma Hussein, an economic journalist and researcher with the Egyptian Initiative for Personal Rights, contends that the IMF conducted its 2016 meeting differently than those it held in 2011 and 2012, which ended without Egypt procuring financing. For example, she says that, in 2011 and 2012, the IMF held meetings with MPs and civil society members, while ahead of the recently approved loan, the conversation was shrouded in secrecy. In March 2013, when the IMF renewed talks with Egypt, discussion was suspended pending parliamentary elections.
This time around, however, the IMF did not hold discussions with any entity other than the government. When asked, IMF officials told Hussein that the fund works in accord with the methodology set forth by the government, contending that the differences in approach across the rounds of negotiations were down to Egypt’s government.
Translated by Assmaa Naguib