Congress, which annually oversees and appropriates $1.55 billion in bilateral foreign aid to Egypt, is following the situation in Egypt closely, including the Islamist-led government's stated commitment to, among other things, pursuing democratic principles and continued peace with Israel. Congress could also pass legislation to shape U.S. policy toward Egypt at the IMF. It discusses the IMF program from a congressional perspective, including how debt relief for Egypt has been tied to an IMF program and legislation that would condition U.S. bilateral economic assistance to Egypt on an IMF program. Background

		Deteriorating Economic Conditions in Post-Revolution Egypt

Economic conditions in Egypt have gradually deteriorated since the 2011 revolution, potentially exacerbating an already polarized Egyptian political climate. Unemployment rose from 9.2% in 2010 to 12.3% in 2012. The central bank's holdings of foreign exchange reserves fell from $34 billion in the fourth quarter of 2010 to $12 billion in 2012, a level that many economists fear puts the central bank at risk of running out of reserves and triggering a currency crisis. Two tentative ("staff-level") agreements were reached, in June 2011 and November 2012, but no agreement has been finalized or implemented. Egyptian authorities have been reluctant to commit to economic reforms that may be politically unpopular and ultimately saddle the economy with more debt. In turn, the IMF's lending policies prevent it from pursuing a program that does not have adequate conditionality commitments in place. Continuing political concerns and uncertainty in Egypt have also contributed to the delay. In the absence of an IMF deal, Egyptian authorities are increasingly turning to other countries in the region for financial assistance, such as Libya and Qatar (described in greater detail below). Tentative Deal #1: June 2011

At the time of the first staff-level agreement, in June 2011, the military-controlled Supreme Council of the Armed Forces (SCAF), led by Field Marshal Mohamed Hussein Tantawi, was exercising executive authority in Egypt and therefore negotiating with the IMF. In March 2013, the IMF suggested that Egypt could qualify for emergency short-term financing from the IMF to stave off imminent economic collapse. The United States can and wants to do more. Some lawmakers who oppose ongoing U.S. bilateral assistance to Egypt may oppose any existing or future IMF support of Egypt. First, some may be concerned that in the rush to stabilize Egypt, the Administration could be too lenient in terms of the reforms it seeks from the Egyptian government. Second, other lawmakers may not want the Administration to push for tough conditions on an IMF loan, fearing that onerous conditions could risk the Egyptian government avoiding an IMF loan and risking economic collapse, and/or risk pushing the Egyptian government to other sources of financing that may not be aligned with U.S. interests. If Congress wants to influence U.S. policy toward Egypt at the IMF, it has legislative tools at its disposal to do so. Congress could pass similar legislation directing the "voice and vote" of the U.S. Executive Director at the IMF with regard to IMF programs and policies toward Egypt. Using the IMF as a Benchmark for U.S. Assistance to Egypt

Some lawmakers may seek to use the terms of IMF conditions as "financial benchmarks" for the provision of existing or any new bilateral economic aid to Egypt. 44 ) would have, if adopted, conditioned the obligation of U.S. economic assistance to Egypt on the President's certification, among other things, that the government of Egypt has "signed and submitted to the International Monetary Fund a Letter of Intent and Memorandum of Economic and Financial Policies designed to promote critical economic reforms and has begun to implement such measures." And the IMF is in negotiating for $4.8 billion.
Congress, which annually oversees and appropriates $1.55 billion in bilateral foreign aid to Egypt, is following the political and economic situation in Egypt closely. Economic conditions in Egypt have deteriorated rapidly since the 2011 "revolution." Political uncertainty abruptly reduced foreign capital flows into Egypt; growth, while still positive, has slowed substantially; the central bank is at risk of running out of foreign exchange reserves; and unemployment has increased from 9.2% before the revolution to 12.3% in 2012. Many policymakers and analysts fear that the fragile economic conditions in Egypt jeopardize the country's political transition and broader stability in the region.
Egyptian authorities and the International Monetary Fund (IMF) have been in negotiations for more than two years over an IMF loan to Egypt in exchange for policy reforms that, if successful, could stave off economic collapse and create more "inclusive" growth. The IMF reached tentative agreements with first the military-controlled Supreme Council of the Armed Forces (SCAF) in June 2011 and later with Egyptian President Mohammed Morsi in November 2012. The November 2012 program would have provided $4.8 billion in assistance, and other donors pledged about $9.7 billion in additional financing once the IMF program was in place. No agreement has been finalized or implemented to date.
Egyptian authorities have been reluctant to commit to economic reforms that may be politically unpopular and increase the country's debt. Pressure to cut fuel subsidies is a particular issue. More broadly, many Egyptians associate the IMF programs in the late 1980s and 1990s with adverse social outcomes. On its part, the IMF has resisted a program that does not have sufficient conditionality consistent with its lending policies. Continuing political concerns and uncertainty in Egypt have also contributed to the delay. In the absence of an IMF agreement, the Egyptian government has recently secured financial support from Libya and Qatar.
Issues for Congress
Some lawmakers who oppose ongoing U.S. bilateral assistance to Egypt may oppose any existing or future IMF support of Egypt, on several potential grounds. Some may be concerned that in the rush to stabilize Egypt, the Administration could be too lenient in terms of the reforms it seeks from the Egyptian government. Others may not want the Administration to overly politicize an IMF loan. They fear that the application of too much pressure on the Morsi government could make accepting a possibly unpopular IMF deal too politically controversial to pursue and that the lack of IMF involvement in Egypt could undermine U.S. interests in the region.
The United States makes the single largest financial commitment to the IMF, and, with the largest voting power at the IMF, the United States wields a high degree of influence over IMF decisions. If Congress wanted to shape U.S. policy toward Egypt at the IMF, it could pass a "legislative mandate" legislation directing the U.S. representative at the IMF to use its "voice and vote" to push for certain policies toward Egypt at the IMF.
Lawmakers may also want to use the terms of IMF conditions as "benchmarks" for the provision of existing or new bilateral economic aid to Egypt. Concerns about bilateral debt relief are, in part, related to the absence of an IMF agreement. Additionally, legislative language (S.Amdt. 44) proposed in March 2013, but not adopted, would have tied U.S. bilateral economic assistance to Egypt to, among other things, an IMF program.