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.
TEXT SIZE - +
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

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid