On Behalf of the Financial Oligarchy, the IMF Targets Egypt and Ethiopia

Both Egypt and Ethiopia, two new members of the BRICS Plus, have been targeted by International Monetary Fund loan agreements with brutal conditions attached. For the last decade, both countries have been carrying out ambitious economic development policies and been active participants in China’s Belt and Road Initiative. However, a series of external circumstances, including the Covid 19 pandemic, the effect of the Ukraine crisis on prices of key commodities, including fertilizers, and now the war in Gaza, have seriously impacted their foreign exchange earnings, which are essential to servicing the foreign debt to western financial institutions.

On March 6, Egypt reached an agreement with the IMF to increase a $3 billion Extended Fund Facility (EFF) to $8 billion. Just hours before the deal was announced, the Central Bank of Egypt announced it would allow the Egyptian pound to float, and raised overnight interest rates by 6 percentage points to 28% as demanded by the IMF. The effect was immediate, with the pound plummeting by 62% against the dollar, the fourth de facto devaluation in less that two years. Other conditionalities include so called “structural reforms” such as privatization of state-owned companies.

On March 18, Egypt also signed an agreement for $6 billion with the World Bank, $3 billion for governmental programs and $3 billion for the private sector, including to fund privatizations. Egyptian Finance Minister Mohamed Maait then announced that the government will maintain strict budget controls and scale back on financing new projects.

As regards Ethiopia, an IMF staff mission has been in Addis Ababa since March 21 to negotiate a loan program. Such loans always come with harsh conditionalities, including currency devaluation, liberalization of the banking system and privatization of state companies, all of which will hit the population hard and stifle real economic growth.

Ethiopia is being blackmailed into making an IMF agreement by the Paris Club of creditor countries. In December, the Club said its offer to suspend Ethiopia’s debt payments until 2025 would be withdrawn if the country does not secure an IMF loan by the end of March 2024. China is Ethiopia’s largest creditor and has already offered debt relief, but the country faces pressure to settle a $1 billion Eurobond due at the end of 2024.

In addition to several international crises, the Ethiopian economy was also hit with the internal conflict between the federal government and the regional state of Tigray, which has been relatively resolved by now, but another is ongoing in the Amhara regional state.