WASHINGTON, DC – As Tunisia’s new constitution goes into effect and other transitioning Arab countries seek to address the social and economic grievances at the heart of citizen demands, there is a need to reexamine international economic policy toward the region. The IMF is the main driver of that policy and special attention should be paid to recommendations coming from the multi-lateral giant.
New America’s Middle East Task Force recently conducted a study of IMF recommendations to Arab governments in collaboration with the Arab NGO Network for Development and the Egyptian Center for Economic and Social Rights. The report is based on systematic reviews of IMF staff reports on transitioning Arab countries – Tunisia, Morocco, Jordan, Yemen and Egypt – and consultations with regionally-based civil society organizations and thought leaders.
“Our analysis highlights the need for the IMF and the G-8 countries to adapt their advice to the changing political and socio-economic conditions in the Arab region,” said Abdulla Zaid, a Carnegie Fellow at New America. “The Fund’s one-size-fits-all advice prioritizing fiscal austerity measures over social and economic rights fails to account for the harmful impact subsidy removal would have on low and middle income individuals, and thus, stability.”
The report emphasizes that the IMF’s call for social safety nets fails to account for corruption, weak institutional capacity, and inadequate protection schemes currently in place in transitioning countries. “In the absence of robust social protection schemes or alternative measures to mitigate the effects of rising commodity prices,” the report contends, “subsidy removal will only further undermine the socio-economic conditions of vulnerable groups.”
The report directs several recommendations toward the IMF, including:
Shift policy advice to Arab governments away from near-term fiscal consolidation toward strengthening productive economic sectors and social protection schemes.
Urge national governments to consult with civil society organizations – including labor unions, NGOs, and municipal authorities – regarding economic reform agendas and national development plans, especially concerning the development of social protection schemes.
Work with national governments to develop short-term alternatives to subsidy reform, such as debt relief, progressive taxation systems, or reducing military expenditure.