Egypt wisely rejects IMF/World Bank loans

It was just announced that Egypt has, at least for the time being, turned down the offer of billions of dollars in loans from the IMF and World Bank. While Issandr El Amrani is perplexed by the decision and seems quite critical of it, as I’ve argued before on this site, I think it extremely wise to steer clear of those institutions.

Moreover, this turn away from the IMF and World Bank should be recognized as an important victory for the pro-democracy movement in Egypt that continues to struggle to make real its vision for the country. According to a report by Heba Saleh in the Financial Times, Samir Radwan, Egypt’s current finance minister:

…said the decision to scrap the loans was in response to public opposition. He  said the military council, in power during the current transition to elected  rule, had decided “not to burden” those who take over from them with heavy  loans.

As Saifedean Ammous, a visiting scholar at Columbia University’s Center for Capitalism and Society, argues in another piece for the Financial Times:

A better approach would be for assistance to wait until elections are completed,  and elected governments are formed. Even better, donors should be willing to put  the question of funding to the public in a referendum, allowing the people to  choose whether they really want projects today and then debt tomorrow. Indeed,  given the strong relationship between donors and the deposed regimes, it is not  impossible to imagine free elections producing new leaderships that reject new  funding, aiming instead to reduce or eliminate foreign aid and debt.