By now it is clear even to a Kinder Garden child that International Financial and Credit institutes are, and have been for long, using two measures while performing their functions, one for them (the free world associates) and the other for us (the eternally developing third world members).. The first is necessary to maintain the vitality of the system, while the second is mandatory to support the first.
IMF Managing Director Christine Lagarde has taken more of a middle ground: She called for countries to reassess budget cuts that are too deep and too rapidly undertaken, but she also spoke about the continued need for balanced budgets, structural reforms and the importance of reducing debt.
"We need growth, first and foremost," Lagarde said Thursday. "Should growth abate … there should be consideration for adjusting the pace" of fiscal consolidation.
In papers and at forums, fund officials and outside experts said it was clear that government belt-tightening was taking a deeper toll on growth, especially in struggling Eurozone economies, than many of them previously thought.
Moreover, academic economists offered new evidence that cast doubt on a pro-austerity view that countries crossing certain debt-burden thresholds would see negative economic output.
Egypt’s Islamist authorities are squeezed between difficult alternatives as the country’s deepening economic woes and dwindling foreign currency reserves cause cuts in crucial state fuel and wheat imports.
A $4.8bn loan agreement they hope to seal with the International Monetary Fund will come only if they agree to tough austerity measures, which include cutting wasteful energy subsidies and raising taxes on consumption.
Egypt imports around 70 per cent of its food, and it now faces a damaging foreign currency crisis after reserves have fallen to $13.5bn, below the critical level of three months imports cover.
Without the loan Egypt has no obvious alternative for avoiding a financial meltdown, unless western allies such as the US decide that it is “too big to fail”, analysts say.
Qatar, a close ally which over the past year pledged some $5bn in assistance to Egypt, said on Monday that it did not envisage providing further funding for the time being.
No more further comments will be needed to explain the effects of the double measures on each part of the global compass.
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