Demands of new Egyptian unions regarding proposed IMF loan

A week before negotiations were concluded on 20 November between the Egyptian government and the IMF on a proposed lending agreement, the first in almost two decades, Egypt’s independent trade union movement decided to make its views known by issuing a detailed statement on the negotiations and their concerns about the conditions attached to a possible loan. The statement was prepared and issued in the name of Egypt’s two new independent trade union federations, the EFITU and the EDLC.

The Egyptian trade union organisations, before preparing their statement, spent two days analysing the impact and possible conditions of an IMF loan with ITUC economists and two weeks ago met for almost three hours with the IMF’s mission to Egypt.

The unions expressed concerns about the lack of a national parliament, which has been dissolved, to debate and ratify a loan; the failure of the government to practise full transparency and consult civil society organisations on the negotiations; and the important restrictions which continue to be placed freedom of association.

Improved trade union and collective bargaining rights would contribute to a more equitable distribution of income as well as allowing workers to exercise their fundamental rights.

The unions expressed the need to fully protect low-income consumers and workers from changes to the fuel subsidy system, which is estimated to comprise around one-fifth of the current national budget. They insisted that improvements to social protection and increases of wages, especially those at the lowest levels, must take place simultaneously with any modifications to the subsidy system.

The unions strongly believe that Egypt needs a more balanced tax system and should seek increased revenues from high incomes, capital gains and property. They cautioned against any general expansion of value-added taxes, which would put a disproportionate burden on low-income earners. The unions also voiced the need to improve pensions and opposed any unilateral increase of retirement ages.

The two trade union federations demanded that any external financing be submitted to independent oversight to avoid the wide-scale corruption regarding use of foreign credit that was rife during the Mubarak era, and should be used first and foremost to raise the low living standards of the Egyptian people. This includes re-investing in the under-funded health and education systems and reconstructing the national economy to create decent work.

The short communiqué issued on 20 November by the IMF on its new loan with the Egyptian government stated that they agreed in principle to the terms of a 22-month "Stand-By Arrangement" for $4.8 billion. It mentions a requirement that the government reduce its fiscal deficit from 11 per cent of GDP in 2011-2012 to 8.5 per cent in 2013-2014 through a reduction of "wasteful expenditures" and tax reforms to increase revenue.

Little detail is provided for either of these measures, except for the expected reform of energy subsidies and a broadening of the sales tax to become a "full-fledged VAT". The IMF communiqué states that extra fiscal resources "will be used to boost social spending and infrastructure investment" as well as to reduce the deficit, but no indication of the scale of the former is provided.

Until further information about the IMF loan agreement is made public, Egyptian unions have no assurance that their proposals were listened to, notably their advocacy for a more balanced and progressive tax system and their insistence that improvements to social protection and increases of wages must take place simultaneously with modifications to the fuel subsidy system.

The IMF’s communiqué states that “the [Egyptian] authorities intend to disseminate the contents of their economic program to a wide range of domestic stakeholders”, which would be a first step towards transparency, which has been lacking so far, about the transformations of the Egyptian economy that the new government intends to carry out.

The statement issued by EFITU and EDLC on the IMF loan negotiations is available in Arabic on the web site of Centre for Trade Union and Workers’ Services

The IMF’s announcement of an agreement in principle for a $4.8 billion loan to Egypt is available in Arabic
and in English

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