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Arab Uprisings Show the Impact of the World Bank and the IMF

Teresa Bouza, April 22, 2011

Teresa Bouza, of EFE has written an important article about the World Bank, the IMF and recent developments in the Middle East. The original piece, in Spanish, was published in ABC on April 16th. With her permission, we’re printing a translation of her piece.

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The uprisings in the Middle East have exposed the workings of the International Monetary Fund (IMF) and the World Bank by showing not only these institutions’ inability to forecast what occurred but also their implicit support for the “status quo” in the region over the years.

The connections between elites in the region and the two multilateral organizations are also now clear.

Prominent defenders of the privatization process in Egypt, which, following increasing signals of endemic corruption, is now under scrutiny, had and retain important posts in the two sister organizations.

Yusef Boutros Ghali, who resigned at the end of February as the Finance Minister of Egypt, held the post of President of the Monetary and Financial Committee, the principal executive body of the IMF, between October 2008 and February 2011.

 As a member of a prominent Egyptian political family, Boutros-Ghali was educated in the US and began his career in the IMF, returning to Egypt in the 1980s, where he negotiated various agreements with the IMF and the Club of Paris to help his country overcome the debt crisis.

The Egyptian economy then began a profound transformation, through which state assets were privatized wholesale.

As Finance Minister since 2004, Boutros Ghali headed the process, with certain success, such as the increase in foreign direct investment to approximately $10 billion annually.

But this process was also a catalyst for recent uprisings, by marginalizing enormous segments of the population, which barely subsisted, while a small group of their compatriots accumulated generous benefits.

Over the past few months, Boutros Ghali, like other architects of the Egyptian “transformation,” has been accused of defrauding the state in order to give preferential treatment to entrepreneurs close to the circles of power.

Among Boutros Ghali’s favored few is the Egyptian ex-Minister of Investment, Mahmoud Mohieldin, one of three managing directors of the World Bank since October 2010. Mouhieldin now occupies a post immediately subordinate to the President of the institution, Robert Zoellick.

Under Mouhieldin’s leadership, Egypt orchestrated a series of changes that earned the country praise in World Bank Reports, such as the “Doing Business Report,” which measures the facility of commercial activity in a country.

In 2007, the World Bank designated Egypt as the foremost “reformista” in the world.

Mohdieldin is now the object of scrutiny for his role in the sale of a hotel chain, although the World Bank denies press reports that the Egyptian ex-minister is the subject of a formal investigation.

“We are in close contact with the authorities and we have no evidence of any investigation,” Robert Zoellick, the World Bank president, told EFE.  He assured EFE that the institution has consulted directly with the Egyptians responsible for the matter.

This, assurance, however, is little consolation to prominent activists in the Egyptian uprising, such as Wael Ghonim, who said yesterday that “the way in which the international community collaborated in the injustice and with the dictatorship is basically a crime.”

“They were accomplices,” said Ghonim, on a panel at the IMF where the director general of the IMF, Dominique Strauss Kahn, also participated.

During the encounter, part of the joint spring meetings of the IMF and the World Bank, Ghonim read a paragraph of a recent IMF report, which sang the praises of Egypt’s economic performance and job creation in the country.

Strauss-Kahn sounded a “mea culpa” and recognized that the Arab revolts had taught “a lesson” to the institution.

“Certainly, what has happened in the north of Africa has been a lesson for us by demonstrating that it is not sufficient to simply analyze the macroeconomic figures, and we’ve got to look far beyond that,” he said.

“Egypt is a good example – and Tunisia also,” said Strauss-Kahn, adding that the macroeconomic statistics for the country were not bad, and that some were “quite good.”

"But the distribution of income, the elevated levels of youth unemployment, created the impression among the population – and not just a perception but also a reality – that the wealth was not for everyone,” he concluded.