The Egyptian government should not borrow from the International Monetary Fund to strengthen the country’s cash reserve, an Islamist party stated on Wednesday, adding that the loan would violate Islamic law.
Egypt’s Salafi Nour Party said that a loan from the IMF, which was formally requested by the government earlier this week, was a form of “usury.”
“Borrowing from abroad is usury,” said Younis Makhyoun, a member of the party’s supreme committee, according to Egypt Independent online news website.
“God will never bless an economy based on usury,” he added.
Makhyoun called on Prime Minister Hisham Qandil to find other ways to raise funds instead of “allowing foreigners to interfere in our affairs.”
Instead, Makhyoun suggested that the government reduce spending, apply an austerity policy, set a maximum wage, apply Islamic regulations to stock exchange speculations and repatriate funds siphoned abroad, Egypt Independent reported.
Despite Islamic teaching highly prohibiting usury, moderate Islamic scholars say that interest rates established by banks are not considered usury.
The Egyptian government on Wednesday welcomed a visit by IMF Chief Christine Lagarde and asked for an increase of the loan offered by the Fund.
During her visit to Cairo, Lagarde met President Mohammed Mursi and Prime Minister Hisham Qandil and stressed the need for a reform program to deal with the country’s economic crisis.
“The loan in general terms is worth 3.2 billion U.S. dollars. We talked about increasing it up to probably 4.8 and maybe more,” Qandil told a joint news conference with Lagarde.
He said Egypt was seeking a signing by the end of 2012 of a loan agreement based on an interest rate of 1.1 percent and a five-year repayment period following a 39-month grace period.
“This high level visit by the IMF which comes very quickly after new government formation sends a positive message not only to Egypt but to the whole world that Egypt is stable and the Egyptian economy is headed for recovery. We will agree on a timeline and road map that will see a loan agreement signed by November or early December. The government has decided to seek foreign borrowing and the IMF conditions are acceptable to us,” Qandil said.
The Islamist Freedom and Justice Party, that holds the most seats in the Egyptian parliament, appeared to welcome an IMF loan despite the party previously rejecting an economic program attached to the loan presented by the military backed transitional government
“The Egyptian president confirmed democratic transition is happening on two levels, political and economic and the economic level definitely needs the support of international institutions. Our view of the IMF, the president confirmed, is that it’s not just a funding organization but it’s an international institution that support confidence in the national economy and encourages other organizations to invest in Egypt,” Yasser Ali, a presidential spokesperson, said.