São Paulo – The International Monetary Fund (IMF) has released a study this Friday (11th) warning that Arab countries undergoing political transitions and those which have completed said processes are faced with the challenge of balancing their economies over the long haul, so as to meet the demands from their populations which have triggered demonstrations and conflicts. These demands, according to the study “Toward New Horizons Arab Economic Transformation Amid Political Transitions,” include more participation in political decision-making and a business environment conducive to job creation.
The study assess the economic conditions of Egypt, Tunisia, Libya and Yemen, which had changes in government during the Arab Spring, and Jordan and Morocco, which have “have engaged in transformation under existing regimes.” In all of the countries surveyed, for instance, spending on transfers, wages and subsidies increased during the political transition years, from 2010 to 2013. On the other hand, fiscal balance has deteriorated.
Although the economic scenario of the countries assessed is delicate, the document notes that inflation, barring Yemen and Egypt, is below the average for emerging countries. There is room for raising the tax burden on natural persons, which is lower than in developing countries, except in Morocco.
One of the main short-term economic solutions set forth by the Fund is the adoption of measures that enable jobs to be created. “Experience from other countries suggests that well-designed infrastructure projects can create jobs and lay a better foundation private sector activity,” according to the study.
In the medium term, the countries at hand need to manage their fiscal deficits and increases in spending to prevent their debts from becoming unsustainable. The main recommendation t all countries is to gradually transition from government investment to private investment, because private companies, according to the document, are the ones capable of creating jobs and fuelling the economy.
The IMF says the countries in transition are capable of growing and increasing their populations’ access to quality jobs and services. It remarks, however, that several measures are needed, including reducing poverty, reforming the energy sector, adopting communication strategies to publicize the actions taken to the population and the business community, their costs and benefits, increasing spending on social assistance, and separating price and inflation policy from politics.
“Unless strong economic and fi nancial reforms are implemented, a gradual economic
recovery will not be enough to bring a meaningful reduction in the region’s high rates of
unemployment in coming years, particularly among women and youth.” Said the IMF director for the Middle East and North Africa, Masood Ahmed, according to the document.
*Translated by Gabriel Pomerancblum
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