Egypt, the IMF and European economic assistance

Egypt is in the grip of an economic crisis, with rapidly rising unemployment threatening stability ahead of elections in October 2013. The government desperately needs money, but is reluctant to sign up to structural reforms that would unlock billions in aid because it fears this will make a bad situation worse.

Europe can help. Instead of withholding all of the $6.5 billion it has earmarked for Egypt until the IMF’s comprehensive reform programme is signed, it can target some funds immediately at measures that will reduce unemployment, stabilise Egypt, and help the country’s fragile democratic institutions.

In an ECFR policy memo – 'Egypt, the IMF, and European Economic Assistance' – Farah Halime argues that although structural reform is necessary to deal with Egypt’s deep rooted economic problems, it would be short sighted for the EU and key member states not to act now.

• They should invest in young people, with the Egyptian private sector still struggling to find qualified employees despite unemployment levels. Donors should target vocational training programmes for young Egyptians.

• The EU is already due to sign two programmes that put millions of dollars into infrastructure projects and technical skills training. These, plus World Bank funding for small and medium enterprises, should serve as a model for smaller, targeted aid programmes.

• Europe should still stand by the IMF’s comprehensive reform programme, aimed at fixing long-term structural problems in Egypt’s economy.