برنامه های تثبیت کننده مورد حمایت صندوق بین المللی پول و منتقدین آن: شواهد حاصل از تجربه اخیر مصر

The IMF-supported stabilization and structural adjustment programs implemented by Egypt in the 1990s were successful in meeting their objectives, and when compared with earlier attempts and the experience of other developing countries. The authorities undertook a sharp reduction in the government's overall deficit and its central bank financing allowing for increased credit availability to the private sector within a framework of a rapidly decelerating monetary expansion. Despite initiating comprehensive market reforms that significantly improved the environment for private investment, the response of the private sector has been disappointing. It is argued that until institutional, regulatory and political constraints are removed, Egypt will not join the group of high-investing and fast-growing economies.

For nearly three decades the International Monetary Fund (IMF) and the World Bank have been sponsoring stabilization and structural adjustment programs in developing countries.1 Member countries approach the IMF for financial assistance when facing balance-of-payments difficulties. These programs have, broadly speaking, three components: first, to achieve the short-run objective of initiating policies that would stabilize and remedy the macroeconomic imbalances which, in the Fund's view, are the cause of the balance-of-payments problems; second, to institute market reforms and structural changes to transform a government-controlled centralized economy to a competitive market-based one that would improve efficiency and restore growth; and third, the program requires the borrowing member country to secure sustainable external financing.2 The emphasis on each of the components depends on the specific conditions of the member country. Over the years, especially recently as more developing countries sought help from the Fund, criticisms against these adjustment and structural programs have come from many different quarters and, interestingly, from all sides of the ideological and political spectrum. Much of the criticism is directed at the macroeconomic policies pushed by the Fund to correct both the external and internal imbalances, which the critics claim sacrifices growth to achieve stabilization. The Fund does not support the components of the program with equal zeal, giving greater primacy to the stabilization measures over the structural reforms. The Fund's position is quite understandable given that this goes to the heart of its original mandate. The IMF was founded in 1945 to help countries cope with temporary foreign exchange shortages under a system of fixed exchange rates. As a result, the Fund seems to show little negotiation flexibility when it comes to the stabilization measures needed to cure the balance-of-payments problem. Thus, if there is no agreement between the Fund and the borrowing member on the stabilization targets, there will be no program. While the Fund puts considerable importance on structural reforms to restore sustainable growth, it sometimes reluctantly goes along with the borrowing country's wishes not to implement adequate structural measures—usually for social or political reasons—as long as there are assurances that the macroeconomic measures are implemented.3 Unlike the stabilization costs (arising from aggregate demand restraint) that are widely distributed, the structural reforms affect particular groups who are reaping huge economic rents from the current system.4 One critic (Feldstein, 1998) has observed, however, that the Fund does not have the right to impose on borrowing members structural changes, however helpful they may be, when they are not necessary to deal with the balance-of-payments problem and are the proper responsibility of the country. The Fund's response is that the structural adjustment is not only necessary to reduce the macroeconomic imbalances, to cement the stabilization policies and to promote growth, but to the extent that the market reforms address the fundamental weaknesses that tend to produce these repeated crises, they should be part of the program. Regarding the sequencing, while some reforms are at the core of the macroeconomic imbalances (such as financial sector reform) and should be undertaken simultaneously with the stabilization policies, the usual recommendation is that in countries with acute macroeconomic problems the structural reforms should be undertaken only after sufficient progress has been made in reducing the macroeconomic imbalances.5 Since the end of the 1973 war until the more recent 1991 Fund-sponsored program, Egypt had been making limited progress in moving from a centrally planned, public sector dominated economy toward a market-based one in which the private sector is to play the leading role in propelling a more rapid and sustained growth. Over that period, Egypt had turned to the Fund for financial assistance and signed a number of agreements, all of which failed. The first agreement with the Fund was in 1977 for a one-year stand-by arrangement during which Egypt utilized SDR 105 million out of a total of SDR 125 million. This was followed in 1978 with an Extended Fund Facility arrangement that allowed Egypt to draw up to SDR 600 million. As a result of policy failures they were allowed to draw only 12.5% of that total until the arrangement expired in 1981. It took Egypt until 1987 to pay down most of its debt to the Fund. This was followed by a one-year arrangement for SDR 250 million. Again Egypt failed to meet the agreed-upon policy conditions, and the total loan was not drawn. While earlier attempts at economic liberalization were movements in the right direction, the process was too gradual and fragmented to avoid the downward slide in the economy, especially in the second half of the 1980s. During that period, despite debt relief, foreign aid, and attempts at adjustment, economic growth was nonexistent, inflation hovered between 20% and 30%, and the balance-of-payments problems kept intensifying. The economic difficulties became so severe that, by mid-1990, the Fund concluded that Egypt might not be able to finance either its food imports or debt service obligations, with the result that this would interrupt the assistance flows (IMF, 1991). Faced with this precarious situation, and in return for SDR 278 million, Egypt signed an 18-month stand-by arrangement that would forego the piecemeal approach for a strong and comprehensive stabilization and structural program with mutually reinforcing policies. This time the intention was to tackle most of the structural weaknesses simultaneously. This was followed in 1993 by a three-year Extended Fund Facility that allowed Egypt to draw up to SDR 400 million, and the latest in 1996 was a two-year stand-by arrangement for SDR 271 million. Starting with the 1991 program an all-encompassing market reform package was initiated that involved broad decontrol of economic activity including privatization of public enterprises, price and trade liberalization, and the introduction of market-based exchange and interest rates systems, all within a context of decidedly tight stabilization policies. In addition, besides making the restoration of sustainable economic growth a primary objective, the programs gave specific consideration to social policies that would alleviate some of the hardships caused by the reforms, and policies addressing environmental concerns. By 1998 the Fund concluded that while the transformation of the economy is far from complete, “… the authorities have continued to press ahead with structural reforms, and progress has, for the most part, been in line with the program” (IMF, 1998, p. 34). The purpose of this paper is to assess the effectiveness of the stabilization adjustment component of the recent programs. This is because, in part, the implementation of all the market reforms is still not complete, and to assess the marginal contribution of each partially completed reform while controlling for all the other factors that affect performance would be too daunting a task.6 The outline of the paper is as follows: Section 2 presents the main issues in the debate between the critics and the Fund, as well as the broad conclusions that have been derived from the crosscountry empirical studies regarding the effectiveness of the stabilization programs; 3 and 4 will in turn evaluate the effectiveness of the programs' fiscal and monetary policy changes respectively in curing the macroeconomic imbalances that existed in Egypt prior to 1991; Section 5 concludes.

Unlike previous agreements with the Fund, Egypt's arrangements since 1991 have been a remarkable success in terms of achieving the objectives of the programs, but much less so in terms of producing the rate of growth and the economic transformation that was envisioned from market reforms. Nine years after the 1991 program, private sector investment is far short of expectations, and it is hard to see a significant impact on the alleviation of poverty. To the extent that the programs cured both domestic and external imbalances, as well as instituted significant market reforms, the experience of Egypt has been, unambiguously a success story. This is particularly true when compared with the earlier attempts, the experience of many other developing countries, or considering the fears expressed by the critics regarding the stabilization programs. What differentiated these programs from the failed earlier ones is that while the latter ones took a piecemeal approach and were viewed by the authorities as being imposed on them, the later ones comprised a comprehensive stabilization and structural program that was developed by the Egyptian authorities with the technical help of the Fund, and was intended to tackle most of the structural weaknesses simultaneously. The stabilization component of the programs produced the results that were hoped for with practically none of the costs usually associated with such arrangements. Egypt undertook a strong fiscal adjustment (compared with that of other developing and OECD countries) which rectified the fiscal imbalances in a short period of time without producing any of the critics' predictions: a sharp drop in output, followed in the longer term by worsening prospects for inflation and the balance-of-payments. Rather, after a short slowdown in the growth rate of real GDP, this was followed by an upward climb to around 5% in 1998, during which time inflation that was hovering between 20% and 30% fell to around 4%, and foreign reserves climbed to record levels. The sharp reduction in the government's overall deficit and its central-bank financing allowed for increased credit availability to the private sector within the framework of a rapidly decelerating monetary expansion, a shift to market-determined interest rates, and a more independent and active central bank. To avoid the financial sector problems that many other developing countries experienced, the adjustment program was implemented within a comprehensive plan that involved the reform of the banking system to make it more competitive and efficient: the financial position of the banking system was strengthened through recapitalizing the public banks and reducing their foreign exposure, reducing financial repression to better mobilize domestic savings and to ensure a more efficient allocation of financial resources through market forces, and finally improving the prudential regulation and supervision. One important effect of the financial and monetary reforms was a sharp reduction in dollarization, and an equally impressive increase in net foreign reserves. After decades of reluctance, Egypt finally initiated a comprehensive structural reform package. The market reforms included broad decontrol of economic activity including privatization of public enterprises, price liberalization to correct major relative price distortions, financial liberalization and the gradual removal of trade barriers, and improvement of the private investment environment by relaxing some industrial investment licensing procedures, and removal of the legal biases favoring public sector companies. But while some aspects of these reforms have progressed slower than what the program called for (such as the privatization of the public enterprises and the dismantling of regulatory obstacles to business entry and operations), other reforms, like private participation in the infrastructure, have exceeded expectations. As a result, the Fund has recently concluded that the structural reforms are basically on track. It observed, however, that since the structural transformation of the Egyptian economy is far from complete, the Egyptian authorities plan “to maintain close collaboration with the Fund” (IMF, 1998). Despite the fact that all involved with the implementation of the programs have hailed them as remarkable successes, particularly the macroeconomic stabilization component, there remains the unsettling fact that the response of private investment to the policy changes has been quite disappointing. In turn, this may be partly responsible for the fact the Egypt's exports growth has lagged behind that of global trade and the export sector appears to be facing increasing difficulty in competing effectively in a more globalized world. This lack of response is distressing in light of the fact that it is the private sector that will be increasingly relied on to propel the growth as the shift toward a decentralized economy progresses. As a result of this critical development, Egypt has as yet not joined the group of high-investing and fast-growing economies. A World Bank report (1998, p. 3) reveals that all countries with annual per-capita income growth of 5% or more, during 1980–93, had an investment ratio of at least 27% and a number of them more than 40%; on the other hand, Egypt, over the same period, had a ratio of 17% and a per-capita income growth of 2.3%. Generally, a host of economic factors is usually presented to explain sustained rapid investment and growth, among them stability of the macroeconomic framework including clear and predictable tax rules and property rights consistent with free markets, a competitive and efficient financial system that includes capital markets and nonbank intermediaries, development of a broad-based infrastructure as well as a human capital base, and a high degree of trade openness to promote efficiency and export growth. On the other hand, in the case of Egypt, what is now abundantly clear is that the real impediments to the development of the private sector, investment, and growth are the serious institutional, regulatory, and political constraints that are basically inconsistent with a democratic society and free markets. Two recent studies, employing basically the same methodology of wide-ranging interviews of leading Egyptian industrialists, identified the same institutional constraints that are of greatest concern to their respondents (World Bank, 1994 and Zaki, 1999). Among the main institutional impediments they report are a bureaucratic and regulatory system that imposes major costs to business operations and acts as a key disincentive to potential market entry; an archaic, overburdened, and inefficient judicial system that fails to protect effectively against breach of contracts or damage to property rights; an exceedingly poor educational system that needs total revamping to produce both workers and managers with much higher productivity to improve the external competitiveness; a lack of policy transparency and predictability; and finally, a tax system that discriminates against incumbent firms and in favor of new entrants, and where a business may not know how much tax it has to pay several years after it has submitted its tax declaration (World Bank, 1994, p. 21). Zaki (1999) introduced an additional political consideration that in the final analysis might prove to be the real Achilles heel to rapid and sustained economic growth in Egypt. What he refers to as the “traditional arbitrariness of the state” arising from political power being concentrated in a few hands, and the lack of transparency and accountability in the conduct of government. Sudden policy changes can occur unexpectedly and without justification creating fear and uncertainty among entrepreneurs regarding their assets; thus their inclination to avoid investments with long gestation periods, as well as to keep most of their assets (estimated in some quarters to be over $ 100 billion) abroad. Thus the general conclusion from the experience of Egypt is that economic reforms and liberalization in the absence of commensurate political and institutional reforms will not produce the economic growth and prosperity that are hoped for.