Tag: Egypt

The International Monetary Fund consists of 187 countries and is concerned with its members’ economic health. It promotes co-operation, economic stability and is also there to lend to those countries facing difficulties. The role of the IMF as a lender has come into question, as critics argue that the conditions placed on loans to countries can cause more problems than they solve, as the cause of the problems is not always identified. However, despite the criticisms and the current charges facing the former IMF Chief, the International Monetary Fund continues to play an important role in the global economic environment.

Many countries have used IMF credit and over the past two decades it has predominantly been the transition and the emerging market economies that have demanded the IMF’s resources. Whilst its lending did drop off in the mid 2000s, the global financial crisis of 2008/09 saw an increase in the demand for IMF funds from emerging economies to some $60 billion. In May 2010, we saw the IMF together with the EU put together a rescue package for Greece and it is now the turn of Egypt. The uprisings in Egypt put the stability of the economy in jeopardy, as investment declined, tax revenues decreased and the usually buoyant tourist industry started to struggle. Despite the efforts of the government to stabilise the economy, it remains short of cash and the IMF looks set to agree a loan deal of $3 billion (£1.8 billion). Egypt would have five years to repay the loan at an interest rate of 1.5%, after a three year ‘grace period’.

Other countries to receive loans include Ireland, Belarus, the Ukraine and Iceland, the latter of which owes the IMF $2,828.67 per person of its population. The UK has used the IMF back in 1976 and it may be something to look out for, depending on how our recovery continues. The following articles look at the IMF and its role in promoting global financial stability.

Articles

IMF to lend Egypt $3 bn: Ministry Associated Press (6/5/11)
IMF agrees $3bn financing deal with Egypt BBC News (5/6/11)
Timeline: Greece’s debt crisis Reuters (5/6/11)
Egypt strikes $3bn IMF deal to ‘re-launch’ economy Guardian, Jack Shenker (5/6/11)
The IMF versus the Arab Spring Guardian, Austin Mackell (25/5/11)
EU/IMF/ECB statement on Greek bailout Reuters (3/6/11)
Belarus wins $3 billion loan from Russia-led fund, still seeks IMF’s help Bloomberg, Scott Rose and Daryna Krasnolutska (4/6/11)
IMF frees up $225mn for Iceland Associated Press (4/6/11)
IMF loan: which country owes the most? Guardian (24/5/11)

International Monetary Fund
International Monetary Fund Homepage
IMF outlines $3 billion support for Egypt International Monetary Fund, IMF Survey Online (5/6/11)

Questions

  1. What is the role of the IMF and how is it financed?
  2. What are the objectives of the loans to countries such as Greece, Iceland and Egypt?
  3. What other countries has the IMF lent to and what are the conditions that have been placed on these loans?
  4. What has been the impact on the Egyptian economy of the uprisings? Think about all the industries that have been affected and the wider impacts.
  5. Can you find any examples of circumstances in which the conditions of an IMF loan have made problems worse for the recipient?
  6. Why are the conditions of the IMF loan to Egypt favourable and how will the loan help the economy?
  7. Look at the trend in IMF lending. What factors explain the peak and troughs? In particular, what is the explanation for the incresae in lending during the financial crisis?