Joint NGO Letter to IMF Re: IMF Engagement on Governance Issues and Corruption in Egypt
June 23, 2020
IMF Executive Board
700 19th Street NW
Washington, DC 20431
Dear International Monetary Fund Executive Board:
We are writing regarding the $5.2 billion loans agreed between Fund staff and the government of Egypt on June 5, 2020, now awaiting the approval of the Executive Board. These funds, made available under a Stand-By Arrangement, follow $2.77 billion in emergency pandemic assistance provided under the Fund’s Rapid Financing Instrument on May 11.
We are eight non-governmental organizations that have been monitoring and documenting restrictions on civil society, constraints on judicial independence, continuing corruption, and poor governance practices in Egypt.
Recent developments in Egypt regarding governance, transparency, rule of law and corruption lead us to believe that the IMF should include strict requirements to ensure that any additional funds disbursed to that country are used for their intended purpose of supporting inclusive growth, improving fiscal transparency, and increasing health and social spending. We are especially concerned that the IMF has yet to publish the project documents of the Stand-By arrangement, which reached staff-level agreement on June 5, nor has it published the project documents of the $2.77 billion emergency assistance agreement to Egypt under the Rapid Financing Instrument approved on May 11.
Without these documents, it is not possible for civil society to assess the proposed measures. This lack of transparency itself raises concerns, as does the lack of sufficient and well-implemented measures in previous loans, including a three-year $12 billion Extended Fund Facility approved in November 2016.
In light of these concerns, we are requesting that the IMF Executive Board delay its vote on the Stand-By Arrangement until the project documents have been published and civil society organizations have had time to read them and engage with the Fund to share their views. We further urge the IMF to only approve the loan if there are sufficiently rigorous anti-corruption requirements in line with the Framework on Enhanced Governance adopted by the Fund in 2018, as well as its commitments to ensuring its response to COVID-19 consistently includes effective anti-corruption requirements and robust engagement with civil society.
The IMF has identified corruption as a key threat to achieving its mission of advancing economic stability in Egypt. According to the IMF press release announcing the staff-level agreement, one of the purposes of the Stand-By Agreement is “improving fiscal transparency,” as well as other measures that are closely related to governance, such as promoting inclusive growth and increasing social spending. These commitments echo those in the IMF’s Extended Facility Fund with Egypt, which promised “increased transparency and accountability in public finances and reduced opportunities for and rewards from rent-seeking” and corruption. Yet measures towards these ends specified in agreements for previous loans disbursed by the IMF have not been followed in full by the Egyptian authorities.
The lack of independence of Egyptian anti-corruption entities and the weakened role of the judiciary, as well as abusive behavior by the security apparatus all, represent high risks for the business and investment environment in Egypt. As the U.S. State Department Country Reports have noted, the government does not effectively enforce its anti-corruption laws. The military’s increasing intervention in the Egyptian economy has highlighted the prevalence of corruption as military-owned businesses lack any independent or civilian oversight, leaving the Egyptian public and experts without access to information necessary to evaluate the costs and beneficiaries of publicly funded projects. This increased military involvement has likely also worked to disincentivize significant domestic and foreign investment alike.
In March 2016, President Sisi fired Mr. Hisham Geneina, the head of the Central Auditing Agency, an independent body designed to act as a watchdog against corruption. The dismissal of Geneina came after he reported that Egypt had lost EGP 600 billion (about US$76 billion at that time) between 2012 and 2015, due to official corruption. Later, Geneina was sentenced to a year in prison for “spreading false news” regarding corruption in Egypt. To ensure its independence, Egyptian law had provided the head of the Central Auditing Agency immunity from dismissal, but President Sisi issued a decree in July 2015, in the absence of the parliament, allowing him to dismiss the heads of a number of regulatory agencies.
For the reasons outlined above, we believe that it is incumbent on the Fund to delay a vote on the loan until the project documents have been published and civil society groups have had the opportunity to engage with Fund staff and the Executive Board. At a minimum, we urge the Board to only approve a loan agreement that:
1. Requires, as a prior action, the revocation of the July 2015 executive decree allowing the president to fire heads of regulatory agencies or a new decree or law that includes sufficient safeguards against the dismissal of the head of the Central Auditing Agency for political purposes.
2. Requires IMF funds to be kept in a separate account, and expenditures accounted for in a separate budget line. All expenditures should be subject to an independent ex-post audit every 6 months that is made public.
3. Requires publication of all public contracts in full, including English translations when available, as well as the names of companies awarded contracts and beneficial ownership information.
We thank you for your consideration, and we would welcome the opportunity to discuss these matters with you further. Please do not hesitate to contact us at [email protected] if you have any questions or to arrange a meeting.