THE DANGERS OF THE FOREIGN LOANS

The method of using the external (foreign) loans to finance the economic project is the most
dangerous method on the country, and how often the Ummah suffered distress because of them,
where they were used as a way to colonize the country. England did not colonize Egypt except
through the debts, and France did not occupy Tunis except through the debts as well. Moreover the
Western states did not extend their influence on the Ottoman State in its last days except through the
debts. The Western countries used, before the First World War, to follow the style of giving financial
loans, then they enter the country and meddle in it through the debts. So in Egypt, the government
continued to take loans between 1864 and 1875 till the debt reached about £95 million, so Kaif
mission came in 1875 to examine the finance of Egypt and, for the purpose of its reforms, it
recommended the establishing of a committee to supervise its finance, and that Khidawi should
submit to its counsel (advise), and not loans has to be decided without its agreement, and a debt fund
was made in 1886 to receive the amount assigned to the debts coming from the local services, thus
the committee was a foreign government inside the Egyptian government. In the same year the
system of dual supervision was also established. According to this system, the supervision over the
Egyptian finance was put under the charge of two supervisors, one of them was an English to
supervise the government public revenues, and the other was a French to supervise the expenses.
The dual supervision developed later on to establishing a mixed cabinet in which two European
Ministers entered, one of them was an English to the ministry of Finance and the other one was a
French to the ministry of work. Thus the English managed to colonise Egypt through the way of
loans. In Tunis, the Ba'i there tended to borrow from Europe, and within less than seven years the
debts reached 150 million Frances, so the European states used that as a pretext to interfere, and
France recommended forming a financial committee, on which England and Italy agreed, and then
the Ba’i issued an enactment in 1870 on forming this committee of French, English and Italian
members headed by a Tunisian employee. The function of the committee was to unify the debt and
the interests, and to run the services which were assigned to that debt. Through this way the French
people managed to colonized Tunis, and this was generally the method used by the Western states.
But the method by which the Western loans are given nowadays is by sending experts to assess the
financial capability of the country, then define the projects on which the loans are to be spent. These
Western countries don’t give the loan, but rather wait till the economic situation in the receiving
countries deteriorates.
They even decide the way by which the confusion and poverty take place through forcing certain
projects and certain conditions so that the loans lead to poverty not to richness, in order that
imposing its domination on the country becomes definite. This is the way which they follow if they
do not appoint American employees to supervise the spending as it happened with some countries.
Therefore the loans did not produce anything except more poverty in the countries which received
loans. The most clear evidence on this matter is Turkey, Iran and Egypt where each of them received
thousands of millions of dollars, yet their economical situation clearly deteriorated to the extent that
they were, before taking the loans, economically better than they are now. This situation in Turkey
and Iran was manifested in the official reports which the governments present and in the statements
of the officials. The statements given by Ismat Inonu, the Turkish Prime Minister, in asking for aid
and the statements of Ali Amimi, the previous Iranian Prime Minister, are the best evidence that the
American loans were the reason of the economical decline of Iran and Turkey instead of helping
them. With regards to Egypt, the distorted figures which are announced try to hide the economical
decline in which Egypt fell gradually. But the situation of the people in Egypt, and the position of the
Egyptian pound and the disarray of the arithmetic balance, and the hundreds of people who sleep on
the shoulder of Cairo streets, all that is a tangible witness on the current economical decline. Why we
need to go far away in this matter, when many Americans gave statements that their loans caused the
poverty to the countries which received from them. On 12 July 1962 the Judge William Douglas, one
of the High American Court Judges, gave a speech in a Masonic meeting in Spatel, where he
announced, “that there were many states whose situation worsened due to their receiving of
American Aid.” He also said, “The senior officials in these countries became rich due to the
American aid and at the same time the members of the public started starving.” He added saying,
“the USA started to loose its reputation in the undeveloped countries. We used to, at the time of
Truman and Izenhawer, struggle against the communism outside by the planes, bombs, guns and
dollars. The financial aid was used to promote the status of the feudalists not to fund the reformation
projects. These financial aids were spent in supporting the leaders of feudalism not supporting the
people to achieve an economical justice.” This alone is enough to show that it is a crime to depend
upon the foreign loans for establishing the project because these loans, besides its danger in being
used as a means to extend the influence over the country as it eventually happened before, through
the new way in which they are given lead to produce poverty instead of richness.
The American loans are a style by which America dominates the countries and extends its influence
on them. It tried the aids but it failed, so it used the style of the unconditioned financial loans and
thus succeeded, and it found that this style could achieve to it all the conditions it wanted. It became
clear that unconditioned aid remained unconditioned so long they were partial, but they will not
remain so when a part of the development projects in the undeveloped countries depends on these
aids, and when implementing those crucial projects was radically connected with the continuity of
those aids. These projects are even restricted with conditions that enable America to force its system
over that country and spread it power on it. So, the speach(this word does not make sense-Shab????)
about the struggle for establishing the future society has moved from the sphere of speach(????) to
the sphere of development and industrialisation projects. These projects then became a political
weapon in the hands of the fighting powers, and thus any set-back falls on those projects became a
set-back to the policy and the philosophy of the political system which implements them. So they are
nothing more than a political weapon in the hands of the state which gives them in order to force its
policy and the philosophy of its system on the country which takes these loans. America does not
conceal its aim from giving these loans. In its official reports it declares that the aim of these loans is
the security of America and the Free World. It happened that in late 1962 and beginning of 1963 a
row occurred in America over the foreign economical and military aids and over their effectiveness.
So Kennedy deputized a committee of the senior personalities headed by General Lusha Clay to
make a study on the foreign aids and the way of possibly increasing this efficiency, that is to achieve
the aim for which these aids were given. Despite that the row continued over the aids. In the last
week of March 1963 General Clay committee published its report which it presented to President
Kennedy in the third week of March, one week before its publications. It came in this report that the
aim of giving the aids and the criteria weapon which they are given is “the national security of USA
and the security and safety of the Free World.” This criteria is general for all the economical and
military aids. The committee said that this criteria originally exists for these aids, and it presented
new proposals to administer the aids so that they proceed towards the planned aim, and be given
according to the defined (limited) measure (criteria) “increasing the national security of USA and the
security and safety of the Free World. All this shows clearly that the aim to America for giving the
loan is not helping the undeveloped countries, but rather the security of America and the security and
safety of the Free World.
A matter which means putting the country under the domination of USA in order to use it as its form
and a means to defend the interest of America and the Free World. Therefore USA presses over
every country which does not take aids to take them. It pressed Indonesia and created troubles in it
such as uprising and disturbances till it forced it to take the loans and it subjugated it. It pressed
Syria before its unity with Egypt, and when it refused that, USA started to create difficulties for it,
till unity with Egypt occurred, where it was then forced to take loans. So it took during the unity
with Egypt the amount of 75.8 million dollar as an economical aid. When it was separated from
Egypt, USA resumed pression over Syria to take the loans. America did not use this style over the
loans which it gives, but it also uses this style over the loans which the international institution give
because USA dominate the international institution. Moreover the loans, whether granted by USA or
others, are spent only by the knowledge of the state or the establishment which gives the aid, and
they are not spent mostly except in consumption projects and public services, and not spent in
productive projects. It appears from all this that taking the loans does not lead to increase in wealth
but rather to subjugate it to the power of the state which gives the loans.
Even if we assumed, for the sake of argument, that these loans are spent on the productive projects,
then taking the loans as they are is dangerous on the country. This is because the loans are either
short term or long term loans. In regard with the short term loans they are meant to hit the currency
of the country to create troubles in it because when these loans are due for payment they are not
repaid by the currency of the country but with the dollar or starling pound, which are both of the
hard currency. The country might be unable to repay with these two currencies because of their
shortage or because the state needs them to buy some necessary things for its industry, so it is
obliged to buy these currencies with its high prices a matter which hits its currency so its value falls
in the market so it is obliged to report to the IMF which then controls its currency according to the
policy which USA,] wants as it is the state which controls and owns most of the share of the IMF.
Or the country could be obliged to expose its foods abroad with cheap prices thus losing
economically. With regard to the long term loans they are put for long terms internationally, and its
repayment is tolerated so that they further multiply till they become huge amounts for which the
arithmetic balance is disarrayed and the country fails to repay them in currency, gold or movable
assets so it becomes obliged to repay them with immovable assets as building, land and perhaps
factories. Thus the debtor state becomes to own immovable assets in the country and has its own
interests which suit to be taken as as excuse for interference and extending the influence, if not taken
as a means forcolonisation and occupation.
Furthermore, taking foreign aids by the state is haram in Islam, because though they are basically
allowed (mubah), they become haram when they bring harm to the state (its authority, its economic
or its security). This is based on the Shari’ah principle which states that if any particular thing
allowed (mubah) leads to harm then this individual action becomes haram while the thing continues
to remain mubah.
Accordingly taking the foreignaid is haram.
Besides that these loans are only taken with interest (usury), and zina usury is haram then taking the
foreign loan isharam.
Thus in view of these dangers which result from taking the foreign loans and becomes usury
(interest) is haram, then it is not allowed in Islam to take foreign loans, and it is proper not to fund
the project s,even the production ones, through the foreign loans.
They have rather to be funded independently by the country itself.

Hizb ut-Tahrir