The Arab Spring, One Year On

By Christine Lagarde

(Version in عربي)

Almost one year ago, countries in the Middle East region embarked upon a historical transformation. Today, the state of play remains uncertain, with the setbacks and intensity of disruptions larger than expected. Here, I am thinking especially of the deplorable loss of life in places like Libya, Syria, and Yemen. And we are now moving into the most difficult, risky, and uncertain period of all.

As I mentioned in a speech today hosted by the Safadi Foundation at the Wilson Center in Washington D.C., we are in the middle of a delicate transition between “rejecting the past” and “defining the future.” It is a period when hard choices must be made, when post-revolutionary euphoria must give some way to practical concerns. It also does not help that this is happening at a time of great turmoil in the global economy. But I remain hopeful. The final destination is clear: the Arab Spring is still poised to unleash the potential of the Arab people.

It will be important to manage this difficult transition in an orderly way.

And here, I want to pay tribute especially to the people of Tunisia, who are going through a smooth and inclusive process of transition. Just as Tunisia provided the first spark of the Arab Spring, so now can it light the path forward for other countries in the region.

Economic challenges

We all learned some important lessons from the Arab Spring. While the top-line economic numbers—on growth, for example—often looked good, too many people were being left out.

And, speaking for the IMF, while we certainly warned about the ticking time bomb of high youth unemployment in the region, we did not fully anticipate the consequences of unequal access to opportunities. Let me be frank: we were not paying enough attention to how the fruits of economic growth were being shared.

It is now much clearer that more equal societies are associated with greater economic stability and more sustained growth.

While each country in the region must find its own path to change, the over-arching economic goals of the Arab Spring remain clear—higher growth, growth that creates more jobs, and growth that is shared equitably among all strands of society.

To that end, let me emphasize a very important point: macroeconomic and financial stability remain absolutely essential, core building blocks of any new society. Without this secure foundation, any efforts to respond to people’s aspirations can simply not be realized.

Working in harmony

To date, governments have responded to social pressures by increasing subsidies, wages, and other spending, to help lessen the hardship faced by ordinary people. This was needed for social cohesion in the short term. But it does not come without cost. Fiscal deficits have widened, which raises concerns about sustainability. It pushes up interest rates, which makes it harder for the private sector to get credit to set up or expand businesses and start hiring people. So across the region, governments need to move towards better and sustainable fiscal policies.

In particular, more targeted social protection systems would help free up funds for spending on areas like infrastructure, education, and health while laying the foundations for inclusive growth. This would be a break from the past when generalized subsidies were used to appease the population while allowing the privileged to benefit from unfair practices. So, macroeconomic stability and inclusive growth can—and indeed must—go hand in hand.

What is more, the government and the private sector must work in harmony. The private sector, including small and medium-sized enterprises, must take on a leading role, to boost investment, productivity, competitiveness—and create jobs.

Enabling environment

But for this to happen, the government must provide an enabling environment. It should put in place modern and transparent institutions to encourage accountability and good governance and ensure fair and transparent rules of the game. The government must also lay the foundations of a modern and competitive economy by breaking down the vested interests and cozy networks of privilege that prevent the region from reaching its true economic potential. There is simply no other way to create the 50-70 million jobs needed for the people joining the labor force and to reduce unemployment over the next decade.

Of course, the region’s destiny lies with itself, but the international community also has a responsibility to help. It must listen to the hopeful voices and provide support—including financing, technical assistance, and market access.

The IMF too stands ready to help. We are working closely with our members in the region, and we are willing to walk the path with them. We are offering the best policy advice possible. We will provide financial help if requested.

And with our technical assistance, we are helping countries build better institutions for a better world. Some examples: We are helping Egypt make its tax system more equitable. We are helping Libya develop a modern system of government payments. We are helping Tunisia improve its financial sector. And we are helping Jordan with fuel subsidy reform.

Amidst a darkening economic outlook and waning confidence, the Arab Spring still shines as a bright light and a beacon of hope, a symbol of what can be accomplished. The region, together with its international partners, must make sure that this light is never extinguished.

4 Responses

  1. […] comments on another topic invited a not-so-subtle suggestion to sit down and shut up.) Here’s her view on the spark that lit the Arab […]

  2. The above comment is absolutely right: in Arab countries, corruption enslaves the people, depriving citizens of their liberties and distributing wealth among a few of them.

    • Sorry, I have a reply for you. Where were the Big Five during these huge numbers of corruption ? I think they support it because it is in their interests, support the dictatorships to be corrupted, then this support feeds the corruption. Everywhere it then affects ordinary peoples; these regimes were responsible for the corruption and were supported from outside.

  3. Let us hope that the Arab Spring is not allowed to degenerate again into a winter of authoritarianism and despotism.

    People of this region have lived a life of fear for decades. Social equality and legal justice were not guaranteed by any worthwhile constitutions.

    Masses are not well versed in the modern techniques of financial, economic and political management; as such, full fledged cooperation is needed not only from financial institutions like the World Bank and IMF but also from other advanced countries of the world. The comments of IMF’s MD are quite encouraging. Technical Training Assistance facility of the IMF will go a long way to bring about the required changes in financial management and infrastructure development which will create employment opportunities on an equitable basis in society.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 819 other followers

%d bloggers like this: