News / Africa

IMF: Arab Spring Nations Face Delayed Economic Recovery

Masood Ahmed, director of the International Monetary Fund's Middle East and Central Asia department, attends the Capital Markets Conference in Doha, September 18, 2012.
Masood Ahmed, director of the International Monetary Fund's Middle East and Central Asia department, attends the Capital Markets Conference in Doha, September 18, 2012.
Reuters
— Arab Spring countries face rising social tensions that could thwart an early economic recovery from over two years of political turmoil that has worsened fiscal pressures and threatens macroeconomic stability, a senior IMF official said on Saturday.

Masood Ahmed, International Monetary Fund (IMF) director for the Middle East and North Africa, said oil importers Morocco, Tunisia, Egypt and Jordan faced the double shocks of high energy and food import bills and the impact of a global economic downturn along with growing popular disaffection since the wave of Arab revolts over two years ago.

“The big challenge this year is to manage the expectation of an increasingly impatient population to undertake the measures that will stabilize the economy and would begin to lay the foundations of an economic transformation that would generate more job creating and inclusive growth,” Ahmed said.

“Those political transitions are turning to be more prolonged and in some cases more contentious and unemployment is higher and social unrest is rising,” Ahmed told Reuters in an interview on the sidelines of a World Economic Forum (WEF) conference on the Middle East and North Africa.

Ahmed said the plight of these countries hit by protests was worsened by extra spending on food and energy subsidies that forced governments to draw on foreign reserves and expand domestic borrowing at high interest rates that raised public debt.

Political turmoil was hurting much needed private investments in the meantime, the IMF official said.

“In a number of these countries, private confidence has not yet taken hold so the recovery such as it was in 2012 was driven by continued government spending rather than a recovery in private activity,” Ahmed added.

Two years of higher spending on wages and food and fuel subsidies will push budget deficit deficits even higher to an average eight percent in 2013. In Egypt, for example the budget deficit was expected to rise to between 10 to 12 percent of GDP this year, the IMF official said.

“The cost of that is that budget deficits have begun to rise and in some cases have risen to levels that are progressively unsustainable,” Ahmed said.

Slumping reserves

Egypt's foreign exchange reserves have slumped since the revolution that toppled president Hosni Mubarak in 2011 due to falling revenues from tourism and foreign investment. Jordan's foreign reserves had also fallen sharply but have since recovered this year with an infusion of Gulf Arab capital.

Growth levels that are forecast to average around three percent this year for oil importing countries were insufficient to absorb more job entrants in a region with traditionally high unemployment that has increased since the wave of unrest that swept the region since 2011.

“Already young people are suffering unemployment levels of close to 30 percent and in last two years there have been further increase in some countries,” the IMF official added.

Governments had to grapple sooner than later with the politically sensitive subsidies that topped $240 billion in 2011 for the Middle East North Africa (MENA) region and accounted for about one half of global energy subsidies.

This was equivalent to about 8.5 percent of regional GDP, IMF figures show.

Universal energy subsidies were benefiting the top 30 percent income bracket among consumers and although Morocco, Jordan and Tunisia had begun to move towards targeted subsidies, more was needed to help reduce hefty subsidies that diverted much needed funds to spur growth.

“In the middle of political and social transition, it is even more difficult to undertake necessary reforms to reduce budget imbalances or try to take action to protect your reserves but the option of postponing these actions much longer really is not there for many countries,” the IMF official said.

“The margin for maneuver is much more limited and today their cushions have been used up a lot and today they find they have the ability to borrow more from domestic markets constrained and their reserves positions are such they really cannot afford to let reserves run down much further,” Ahmed said.

Lifting fuel subsidies had triggered civil unrest in Jordan last November and some analysts say the government's move to raise prices of heavily subsidized electricity in June under an IMF standby deal was fraught with risks.

You May Like

Reports of Mass Murder on Mediterranean Smuggler’s Boat

Boat sailed from Libya with 750 migrants aboard and arrived in Italy with 569 More

Video New Thailand Hotline Targets Misbehaving Monks

Officials say move aims to restore country’s image of Buddhism, tarnished by recent high profile scandals such as opulent lifestyle, drug and alcohol abuse, as well as child sex abuse More

Study: Dust from Sahara Helped Form Bahama Islands

What does the Sahara have in common with a Caribbean island? Quite a lot, researchers say More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Astronauts Train in Underwater Labi
X
George Putic
July 25, 2014 7:25 PM
In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid