On Sunday, March 4th, John Kerry released $250 million in aid to Egypt. The loan, from the United States, is contingent on the the political and economic reform that Egyptian President Mohammed Morsi committed to earlier this year. According to a New York Times editorial, this "vote of confidence" in Egypt is "critical to the stability of the region", which is why the deal came with a couple conditions. The $250 million paves the way for a much larger $4.8 billion loan agreement from the IMF, that will not be delivered in full until there are clear signs of improvement in the country's political stability. The Obama administration will be keeping a close watch on the execution of Morsi's commitment, and will release more and more money (up to $1 billion) to Egypt as they begin (and continue) to meet the conditions of the agreement.
Should everything go according to plan, the loan should "help restore investor and foreign lenders' confidence in Egypt". Already, however, there has been opposition to the US' involvement in proceedings because of desire to "reject American pressure", opposition that comes even though this may be the regions only way out of the hole that they have found themselves in. Kerry, despite the oppositions cry, urged all Egyptians to work together to really help themselves, and stated very clearly that the US is "“committed not to any party, not to any one person, not to any specific political point of view,” but to democracy, human rights, freedom of expression and tolerance."
I agree with the sanctions that the United States is placing on their loans. However the amount is a little unnerving. The United States starting out with the $250 million is ok. It takes a lot of money to run a country and to dig a way out of a hole. Egypt will not need a total of $5.8 billion from both the US and the IMF.
ReplyDeleteThe United States is taking a gamble by giving the original $250 million. I would like to know why the United States is taking such confidence in Egypt when the IMF will not invest in Egypt. It is a risky investment for the US. I know that stability in the MIddle East is important, however giving money will not ensure political stability.
Well the IMF plans to loan the money to Egypt, but not just yet. I think that the US' loan is acting as sort of a test to see if the overall investment will be worth it. I agree however that up to $1billion from the US added to a possible $4.8 billion from the IMF may just be a bit much. I guess we'll see what happens
DeleteI don't think the 5.8 Billion will make much of a difference. Foreign aid has little empirical effectiveness. A study by Raghuram Rajan and Arvind Subramanian on aids effectiveness sees little impact, whether positive or negative.
Deletehttp://www.nber.org/papers/w11513
More than likely this money will help a select few people, force Egypt to be at the will of the IMF, as well as the U.S. If Egypt does manage get the loan for the U.S. it will be interesting to see how much influence the U.S. gains considering the leading party is the Muslim Brotherhood.
My guess is that the US is attempting to ensure some measure of regional control. The US wants to ensure, more than anything else, that whatever sort of government comes to fruition in Egypt is friendly to the US for economic reasons and as an assurance of Israeli security.
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