It appears nobody knows how to judge Mohamed Mursi, Egypt’s first freely-elected president. There is still confusion over what programme and vision for Egypt the Muslim Brotherhood has now it has gained political power. This has been compounded by Mursi keeping his cards close to his chest and not giving frequent interviews. It has led to his actions as president – from promises to honour Egypt’s treaty with Israel, to support the security of the Persian Gulf countries (against Iran), and negotiate with the International Monetary Fund (IMF) on a multi-billion dollar loan they had previously rejected on religious grounds – being interpreted as either technocratic or selling out to the West. Neither of these labels are appropriate. The former engineering professor is neither a technocrat, nor a sell-out.
Dealing with the military
His tenure has begun under considerable constraints – an old elite, military, judicial, economic, has sought to limit his power, he inherited a floundering economy and has been confronted with complex regional unrest.
Mursi’s successful outmanoeuvring of the military, culminating in the dismissal of Defence Minister Tantawi and Army Chief of Staff Sami Anan, both shows the President’s determination to move Egypt away from its military dominance and incredible skill in seizing his moment to act after 16 Egyptian soldiers were killed in Rafah on the Gaza border in the Sinai.
The military’s power is not only through the state but also economic – by some estimates the military controls up to 40% of Egypt’s GDP – and it remains the Brotherhoods primary political contender. Tantawi, Egypt’s de facto head of state during transition, and Minister of Defence from 1991, was the most powerful officer representing the old regime and continuing military dominance.
Mursi’s “defeat” of the military was not overtly aggressive. He did not repress it or make it politically irrelevant, but replaced its higher ranks in the hope of gaining the loyalty of a new generation of military leaders. And by offering Tantawi and Anan positions as Senior Advisor to the President he has saved their reputation and kept them close enough to monitor.
The bleeding Egyptian treasury and previous IMF ‘help’
Following the recession triggered by last year’s uprising, Egypt is currently experiencing a trade deficit – losing a reported $2 billion of its foreign currency reserves each month. These massive losses run the risk of causing inflation – if it reaches a point where the treasury would need to print more money to pay for the country’s imports. The effect it would have on an already depressed economy is unpalatable. One alternative would be to secure a foreign cash injection, with the IMF seemingly ready to negotiate.
However, past IMF-involvement in Egypt has not gone well. The 90s reforms were marred by corrupt implementation, state assets were often grossly undersold, meaning that enormous profits for an elite were not translated to the entire economy. Consequently, Egypt found itself in a new liquidity crisis in the early 00s that forced several painful currency devaluations, which were a contributing factor to the 2011 Tahrir Square protests.
The first programme, started in the late 70s, was similarly misguided. A reduction in subsidies led to a rise in consumer prices – this led to a riot which claimed 79 lives, wounded 1,000, and forced the abrupt withdrawal of the IMF.
The current negotiations
This bleak history makes it unsurprising that a former presidential candidate sued Mursi and his PM in order to reveal the exact contents of the current deal. However, unlike previous programmes, there are hopes that the unilateral imposition of conditions is gone. The Egyptian government will have an input in the design of this IMF loan.
Critics have argued that, as the deal is still subject to IMF approval, the content may not be any different. However, following 2011’s uprisings and broad demands for economic and social justice by participants, the IMF may be more willing to allow pro-poor policies today than during previous programmes, for the sake of political stability. For instance, a recent IMF study argues against energy and food subsidies – a frequent IMF bugbear – but rather than removing them outright, thereby reducing the living standards of everybody in society, the study argues for their replacement with targeted safety nets to protect the poorest.
Although Egypt’s military and bourgeoisie have retained their privileges after the fall of Mubarak, a president whose legitimacy is firmly grounded in a large segment of the population now balances them. Mursi might have the political nous to avoid this new reform programme solely benefitting the elite.
Mursi’s refusal to consider devaluing the Egyptian pound in negotiations with the IMF shows that he has his core constituent’s interests at heart. While devaluation would lower export costs and might be a short-term fix, it would hit the poorer classes disproportionally hard – unlike the rich, they cannot invest their money in real estate or send it abroad.
The bare necessities
The Muslim Brotherhood have been forceful in their critique of these plans – advocating for the amendment of international gas-sale agreements, the increase of energy prices for factories, the collection of tax arrears, and stating that any loan taken would need to be halal, i.e. interest-free.
However, domestic options are either too difficult to manage, come at too high a political price, or are simply insufficient to solve the liquidity crisis. The administration rescinded the demand that any IMF loan be halal, justifying the change by stating: “sometimes necessity allows exceptions.” This drew harsh criticism from Egyptian Islamists who saw this as selling-out Islamic ideals to a western institution. Western observers saw a predictable technocrat doing the right thing as a member of the international community. However, he was simply prioritising the living standard of his core constituents.
The details of the IMF deal are yet uncertain, but the emphasis on national control and oversight of the programme is a good sign, as is the refusal to consider devaluing the pound. It may be too soon to judge Mursi’s presidency, but a proper reading of these early signs suggest that he has to be judged on his own terms, neither as a technocrat nor as a ‘sell-out’ to the west.
By Edin Arnby Machata