Egypt looks to Gulf monarchies to finance budget deficit

Egyptian Finance Minister Samir Radwan announced Saturday that Egypt will no longer seek loans from the World Bank and International Monetary Fund (IMF). Radwan's statement came in spite of an agreement reached earlier this month for a $3 billion, 12-month loan from the IMF, headed -- as of yesterday -- by France's Christine Lagarde.

Egypt's decision follows major budgetary revisions that put the North African country's budget deficit for 2011-2012 at 8.6 percent of GDP, down from 11 percent in the initial draft.

Explanations for the shift ranged from "pressure of public opinion," according to one advisor to the finance minister, to more attractive sources of funding -- namely, "gifts" from Gulf monarchies like Qatar and Saudi Arabia.

"Egyptians are a little leery of too much intervention from the West," said Marina Ottaway, director of the Middle East program at the Carnegie Endowment for International Peace. The World Bank and IMF are widely associated with American influence in the region, and with ousted strongman Hosni Mubarak, who undertook substantial IMF-led economic reforms in the 1990s.

Egyptian distrust of international lenders may also be directly related to IMF and World Bank policy outcomes. Samer Shehata, a professor of Arab politics at Georgetown University, noted in a recent Marketplace interview that "Over the last decade … the World Bank and the International Monetary Fund have focused more on macroeconomic indicators than on how real people in these countries are doing."

They pushed neoliberal policies like deregulation, subsidy cuts, and privatization, according to Shehata, and promised high growth rates and robust levels of foreign direct investment. "Yet these same policies … simultaneously produced high inflation and declining real wages, and increasing levels of poverty and income inequality, according to the World Bank and IMF's own statistics."

The Gulf money comes without these types of policy prescriptions and without the political baggage associated with accepting Western aid. According to Ottaway, "Much of [the Gulf money] will come as cash injected directly into the banking system. Money with no economic conditions attached. In this way it is preferable."

But while Saudi and Qatari money comes without traditional economic constraints, it is almost certainly not without strings attached. "Gulf states like Saudi are giving money because they want to keep Egypt in their orbit," said Ottaway. "There is no doubt that Saudi Arabia doesn't want Egypt to emerge [as a regional power] like it did under Nasser."

Increased potential for graft is also a concern among analysts. Lisa Blaydes, an assistant professor of political science at Stanford University and the author of Elections and Distributive Politics in Mubarak's Egypt, told FP in an email that Gulf aid will probably be in the form of "soft" or cut-rate loans. "There will almost certainly be less transparency associated with a loan of this type than with IMF funding," she said.

Una Galani, writing for Reuters, had a similar take: "many questions remain over if, when, and how the bulk of the Gulf aid will be channeled."

All concerns aside, Egypt's willingness to blow off the IMF -- a traditional seal of approval looked to by other lenders -- signals a sea change in the international lending market. With wealthy countries like Saudi Arabia and, indeed, China handing out soft loans, there are many more options available to aid supplicants. In Ottaway's words, Egypt's decision is "part of a general pattern where international financial institutions have lost their monopoly."


Major leak sheds light on Chinese propaganda strategy

The Danish daily newspaper Information has obtained classified documents about propaganda strategy from the Chinese Communist Party (CCP) that would have been approved by top party leaders like President Hu Jintao and Prime Minister Wen Jiabao. It's rare for foreign outlets to get a leak of this scale, with documents approved by figures of this importance within the party. The 60 pages of documents lay out a strategy of pretending to allow greater access to information while actually clamping down more harshly at home. From the article:

Among other things, the regime has insisted that it does not exercise any censorship. However, the official document outlines several instances of how the Chinese authorities should prevent people from getting in touch with "politically sensitive information". Such information must be either "blocked", "destroyed" or "cleansed" from the Internet, media and books, the order from the Central Committee to the lower levels of the state apparatus makes clear.…

The same line is repeated in other documents, including the one from the Party leadership in Beijing, which declares that "all illegal and harmful information on Chinese and foreign web sites should be completely blocked." And that people who disseminate such information should be "indicted and prosecuted quickly before a judge and be quickly convicted."

The contents of the leaks aren't themselves all that surprising; the crackdowns following the Jasmine Revolution made it clear that China wasn't liberalizing anytime soon. What is noteworthy is the fact that these were leaked at all, by someone who would be privy to very high-level Politburo decision-making. The takeover of the party by hard-liners hasn't been welcomed by everyone within the CCP. The People's Daily, the party's official paper, made waves in April and May with a spate of editorials with a remarkably liberal bent. Consider these passages, translated from the original editorials by University of Hong Kong's China Media Project (CMP):

Only in the midst of competition will the value of ideas be shown, and only through practice can they be tested. "I disapprove of what you say, but I will defend to the death your right to say it." This [quote from Voltaire] expresses a kind of openness, and even more a sense of confidence. The hurling of epithets and the yanking of pigtails, this way of thinking is fundamentally is a sign of weakness and narrow-mindedness, and it does not benefit the construction of social harmony or the creation of a healthy temperament. (People's Daily, April 28)

We are ushering in a "golden age" of expression, but there are still many voices that have not been heard. On the one hand, some voices have been submerged in the vastness of the field of voices, so that it is difficult for them to find the surface. On the other hand, there are some voices that only "speak, but in vain," that make their wishes known but find their problems unresolved. These can all be thought of as null expression, and some have called them "sunken voices." (People's Daily, May 26)

One might dismiss these editorials as empty propaganda. However, the CMP points out that the People's Daily has a long history as a forum for intraparty debates and that a number of liberal Chinese journalists commenting on Twitter were taking these editorials seriously.

The leaks emerge at a critical time. Preparations for the party's 90th-anniversary celebrations, taking place on July 1, have featured a mini-revival of Mao-era traditions like party songs and revolutionary propaganda. In the background, the party elections taking place in 2012 are expected to introduce major changes in China's leadership. The next 12 months will determine much about the fate of the CCP's liberal wing over the next 10 years. No doubt they hope there's more in their future than leaks to Danish dailies.