iStockAnalyst.com
By Masood Ahmed
The Arab Spring has injected new optimism into the Middle East and
North Africa and, if managed well, the historic transitions that are
under way will lead to a more prosperous future for the people of the
region.
At the same time, the past year and a half has been difficult for the
Arab countries in transition. They are facing economic strains as they
manage political change and urgent social demands. It is a period when
hard choices must be made, and it does not help that this is happening
at a time of great turmoil in the global economy.
Close engagement
Throughout this difficult period, the IMF has remained closely
engaged. We are advising countries on how to manage shocks to maintain
economic stability, ensure that vulnerable households are protected
during the transition, and lay the basis for job-creating growth.
We are also providing technical assistance to help build capacity and
stronger institutions. In Egypt, for example, on tax reform to improve
tax equity; in Libya to better manage its wealth through improved
public financial management; and in Tunisia on measures to strengthen
the financial sector.
Another priority—at a time when government budgets are stretched—is to
help countries meet their financing needs. As we said in early 2011,
the IMF stands ready to provide such financial assistance, but it must
come when the countries themselves feel the timing is right and in
support of economic programs that are designed by, and enjoy broad
support in the country.
As part of this process, I am pleased to say that a few days ago, in
response to the authorities’ request, the IMF Board approved two loans
in support of the economic reform agendas of Arab countries in
transition: one for Jordan under a Standby Arrangement in the amount
of $2.05 billion, and another for Morocco in the amount of $6.2
billion under our Precautionary and Liquidity Line (PLL). This follows
on our earlier concessional loan to Yemen under the Rapid Credit
Facility.
One size does not fit all
The IMF’s assistance varies across the region, given that each country
faces its own economic challenges, and the instruments to tackle those
challenges must be tailored to address those unique circumstances.
In Jordan, the IMF loan supports the authorities’ program to stabilize
the economy and address the negative impact of exogenous shocks,
mainly in its energy sector, as well as regional unrest. It will allow
Jordan to guard against additional shocks and avoid sharp adjustments
that could have an adverse impact on growth and the vulnerable
segments of the population. By providing liquidity over the next three
years, it will also allow the authorities to implement their national
reform program gradually and with adequate measures to protect the
poor and vulnerable households. And, it will support the authorities’
efforts to foster high and inclusive through measures to improve the
business environment, enhance transparency, and foster trade.
In Morocco, our financial assistance is designed to provide insurance
in case the country is affected by a sharp deterioration in its
external economic environment. Morocco’s track record of sound
economic policies has contributed to solid economic performance,
which, in turn, has helped cushion the impact of the global crisis and
respond to pressing social needs. So, Morocco does not have an
immediate need for any IMF financing; nevertheless, uncertainties
about the euro zone and possible higher oil prices pose real risks.
The two-year PLL with the IMF provides Morocco with a useful insurance
policy for meeting any possible financing needs should these risks
materialize.
For Yemen, approval of the concessional IMF loan earlier in the year
allowed for the immediate disbursement of financial assistance to
support the country’s economic recovery program following a prolonged
political crisis.
Learning from experience
In providing support, we have taken something of a new approach that
draws upon the lessons of the Arab Spring and the IMF’s experience in
its 188 member countries. We know that programs are much more likely
to succeed if they are designed and owned by the national authorities
and enjoy broad support within the country. We are also focusing much
more explicitly on policies that ensure that the benefits of economic
growth are shared more broadly and on protecting the most vulnerable
members of society.
The Arab Spring has shown vividly that aggregate growth numbers alone
tell only part of story. For growth to be sustainable, it must create
jobs, its benefits should be widely spread—not captured by a few—and
there should be a broader and fairer distribution of economic
opportunities across the population.
We are bringing this new understanding into our engagement with the
region, and our discussions with authorities reflect this. I encourage
you to look up the documents that will soon be on our website
describing the programs we are supporting in Jordan and Morocco and
tell us what you think.
