Related article ~ Islamic Development Bank to support development in Egypt ...
IDB, in Saudi ArabiaJuly 3, 2011
Egypt picks IDB over IMF
Shari'ah loans like the Islamic Development Bank's (IDBIDB) $2.5bn package are clearly the best fit for Egypt's financing needs, economists and lawyers have told The Islamic Globe, in the week the country shunned the IMF.
Egypt's finance minister Samir Radwan decided that the IMF's $3bn facility to help plug a widening gap in its public finances was not needed "for now" after revising his fiscal budget. Jeddah-based IDBIDB recently agreed a three-year loan to fund development projects, as well as insurance for imports and exports.
Jonathan Lawrence (pictured), head of Islamic finance and investment at law firm K&L Gates, said: "If you're looking at development finance, what's needed in Egypt fits really well into the Islamic finance model. In other words, you will have a road or hospital to show for the financing whereas the proposed IMF facilities may not have been capable of demonstrating such direct tangible results."
Because of its long history of imposing strict economic conditions on borrowing nations and its western roots, the IMF is perceived negatively in the Middle East. Peter Chowla, from the UK's Bretton Woods Project, which monitors IMF activities, said the fund would have pushed to liberalize the Egyptian economy and introduce business-friendly reforms to benefit western banks and corporations. "You don't get this with the Islamic loan necessarily, so it's more favourable in that sense," he said.
In the run-up to Radwan's decision this week there had also been fears over Egypt's suitability as a borrower from the IMF. Jane Kinninmont, a senior research fellow for MENA at UK foreign think tank Chatham House, said: "There was understandably some skepticism about whether the transitional military-backed government really had the authority and legitimacy to sign up to economic policy conditions, when it is only supposed to be in power until September."
http://www.zawya.com/story.cfm/sidZAWYA20110703084414/Egypt_picks_IDB_over_IMF
