By Masood Ahmed
(Version in عربي)
As we launch the IMF’s Arabic blog, Economic Window, we are witnessing an historic shift in the Middle East and North Africa (MENA). It is clear that the popular uprisings that began 10 months ago were born of a desire for greater freedom and for a more widespread and fairer distribution of economic opportunities.
But the scale of protests in the region and the associated deplorable loss of life came as a surprise to everyone, including us at the IMF.
Like others, we had pointed to the ticking time bomb of high unemployment, but we did not anticipate the consequences of the unequal access to opportunities. We had focused our efforts on helping countries in the region build solid macroeconomic foundations, liberalize economic activity, and introduce market-based reforms that would generate higher economic growth. IMF lending, policy advice, and technical assistance have indeed contributed to improving the economic indicators of many countries in the region. However, with hindsight, it is clear that we were not paying enough attention to how the benefits of economic growth were being shared.
A clear lesson is that even rapid economic growth cannot be maintained unless it is inclusive, creates jobs for the growing labor force, and is accompanied by social policies for the most vulnerable. For economic reforms to be sustainable, their gains must be broadly shared, not just captured by a privileged few. Widespread corruption is not just an unacceptable affront to the dignity of citizens, it also deprives them of the economic benefits. And the absence of transparent and fair rules of the game will inevitably undermine inclusive growth.
An equally important lesson is that a socially inclusive agenda will not survive without economic and financial stability. Since the beginning of the year, the region has witnessed considerable uncertainty and economic pressures, from both domestic and external sources. The recent worsening of the global economy will add to these pressures. Countries have stepped up spending to respond to the needs and aspirations of their people. Higher spending is indeed necessary in the short term, but it needs to be designed such that it can be unwound later to sustainable levels in order to limit its long-term fiscal consequences. Given difficult economic circumstances, some countries will need official financial support.
Own path to change
Now is also the time to start formulating national reform strategies, essential for building confidence and providing the basis for sustained inclusive growth, and which some countries have already embarked upon. Each country must find its own path for change, but all will need to encompass commonly accepted goals of higher, job-creating economic growth; greater social and economic inclusion; strong institutions that ensure accountability and good governance; and social protection for the most vulnerable.
Leadership on the road ahead should come from countries themselves. The international community can contribute to success of this agenda by providing an ambitious and multifaceted program of support, encompassing incentives such as financial assistance, market access, labor mobility, and credit guarantees. The Deauville Partnership has brought together an impressive group of countries and institutions and could now become a valuable platform for driving the process forward.
Committed to help
Here at the IMF, we are fully committed to helping the region. We stand ready to provide financial support in the amount of about $35 billion to the region’s oil-importing countries, if requested—in addition to the $38 billion pledged by the international and regional financial institutions. We are also expanding our technical assistance and looking at how we can adapt our work to reflect the lessons of the Arab Spring. And we are taking into greater consideration not just how our policy recommendations benefit the economy, but also how they affect different parts of the population.
While there are many uncertainties, and the months ahead will be challenging and inevitably marked by setbacks, we should not lose perspective of the potential long-term benefits of the Arab Spring. The region has many strengths: a dynamic and young labor force, vast natural resources, ancient civilizations and rich culture that attract scholars and tourists, a large regional market, an advantageous geographic position, and access to some key markets. The current period of transition will ultimately result in improved living standards and a more prosperous future for the peoples of the region.
Filed under: Economic Crisis, Emerging Markets, Employment, Financial Crisis, Fiscal Stimulus, growth, Inequality, Middle East, Public debt, عربي | Tagged: Arab Spring, IMF Arabic blog, jobs, lessons, Masood Ahmed, subsidies, unemployment |