CAIRO — Egypt has cancelled plans to borrow 3 billion dollars from the International Monetary Fund because of conditions that violated the country’s national sovereignty and a public outcry that warned against terms that were blamed for impoverishing many Egyptians.

According to several Egyptian newspapers, General Sameh Sadeq, member of the country’s ruling military council, said the country turned down the loans, and those under discussion with the World Bank, because there were “five conditions that totally went against the principles of national sovereignty.” Gen. Sadeq didn’t detail what these conditions were. 

The IMF loan would have made Egypt the first recipient of funding in the Middle East since the so-called Arab Spring movement against Western-backed dictatorships. 

At a G8 summit last month in France, the IMF announced that it could make available as much as 35 billion dollars in loans to the region’s countries over the next few years. 

World Bank Group President Robert B. Zoellick in May announced 6 billion dollars in funding over the next two years for Egypt and Tunisia, the two countries where the Arab uprisings started, to help the two post-revolutionary nations modernize economies. Egypt’s share would have been 4.5 billion dollars. 

General Sadeq’s statements on Tuesday contradict statements by the government of Prime Minister Essam Sharaf and his Finance Minister Samir Radwan, who both served under ousted president Hosni Mubarak, that the new loans came with no conditions. Both officials have advocated publicly for more loans to ward off the specter of a budget deficit, a staple argument in many countries for IMF and World Bank loans. 

The decision was taken first on Friday by the country’s military rulers, who took over after a popular revolution ousted the Western-backed Mubarak on Feb. 11. The military have said that some conditions by the IMF and the World Bank on previous loans, that included privatization of banks and massive food and energy subsidies cuts, fomented public anger at the Mubarak regime. 

The Finance Ministry has so far reluctantly backed down from its loans decision and said in a statement on its website that the measure to reject the loans came in response to “public debate and to consultations with the Supreme Council of the Armed Forces.” 

The ministry said it now revised its budget deficit to only 134.3 billion Egyptian pounds (22.4 billion dollars) from 170 billion Egyptian pounds forecast before agreeing on loans with the IMF. 

The military’s council, which is acting as a president until a new parliament is elected in September, said there was enough financing locally and from regional countries that made borrowing from the two Washington-based institutions unnecessary. 

 In recent weeks, Saudi Arabia, Qatar, the United States and others have promised large amounts of assistance to the country. 

Moustapha Abdelsalam, a banking sector expert with Al-Alam Alyoum business daily, said that local banks can easily cover the budget deficit. The government can finance the deficit by borrowing 120 billion Egyptian pounds (20 billion dollars) domestically. 

The military’s decision comes after a public outcry, and many anti-debt activists warned that the new loans could subject Egypt to a new set of Bank and Fund conditions and outside pressure, something many here say they hoped the revolution would end. 

The Council for Revolutionary Trustees (CRT), a non-governmental organization formed after Mubarak’s ouster of Internet and democracy activists who faced up to the powerful security forces of Mubarak over 18 days of revolution, issued statements saying “outside borrowing contradicts the principles of the Egyptian Revolution that called for freedom from all sorts of local and foreign pressure.” 

The move to borrow by the Sharaf government was surprising because it has been appointed as caretaker for less than six months and is widely believed to lack enough delegation from the Egyptian people. A host of columnists rebuked the government for taking such major decisions without representation from the Egyptian people. 

Earlier in June, the IMF announced that Egypt has reached agreement with the International Monetary Fund (IMF) on a draft 12-month 3 billion dollar financing package to support the country’s program of  changes. 

The IMF, World Bank and other multilateral development banks announced the “Deauville Partnership for the Middle East” to offer loans to other countries in the region at the G8 summit in late May. 

The World Bank has pledged 4.5 billion dollars in loans to Egypt over the next two years to address budget and reserve shortfalls and to finance economic changes that strengthen its credit and investment prospects. 

It is not yet clear now if Egypt’s decision might influence plans by other countries in the region to borrow. 

(IPS)