The Arab Spring, One Year On

IMF Blog, December 6, 2011

Source details

Almost one year after the uprisings, the state of play remains uncertain, with setbacks and intensity of disruptions larger than expected.
Deplorable loss of life cited in Libya, Syria, and Yemen.
Transition described as a delicate period between “rejecting the past” and “defining the future,” requiring hard choices and a shift from post-revolutionary euphoria to practical concerns.
Global economic turmoil compounds the risks, but the final destination is described as clear: the Arab Spring is still poised to unleash the potential of the Arab people.
Tunisia highlighted as an example of a smooth and inclusive process of transition that can light the path forward for other countries in the region.

Top-line economic numbers (for example, growth) often looked good, yet too many people were being left out.
The IMF acknowledges that it warned about the ticking time bomb of high youth unemployment but “did not fully anticipate the consequences of unequal access to opportunities.”
It is now much clearer that more equal societies are associated with greater economic stability and more sustained growth.
Over-arching economic goals remain: higher growth, growth that creates more jobs, and growth that is shared equitably among all strands of society.
Macroeconomic and financial stability are emphasized as “absolutely essential, core building blocks” of any new society; without them, responses to people’s aspirations cannot be realized.

Governments have increased subsidies, wages, and other spending to lessen hardship and preserve social cohesion in the short term.
Consequences of these measures include:
- Wider fiscal deficits, raising concerns about sustainability.
- Higher interest rates, making it harder for the private sector to obtain credit to set up or expand businesses and start hiring.
Policy implication: governments across the region need to move towards better and sustainable fiscal policies.
Recommendation: implement more targeted social protection systems to free up funds for infrastructure, education, and health while laying foundations for inclusive growth.
Assertion: macroeconomic stability and inclusive growth “can—and indeed must—go hand in hand.”
The private sector, including small and medium-sized enterprises, must take a leading role to boost investment, productivity, competitiveness, and job creation.

Governments must provide an enabling environment by:
- Putting in place modern and transparent institutions to encourage accountability and good governance.
- Ensuring fair and transparent rules of the game.
- Breaking down vested interests and cozy networks of privilege that prevent the region from reaching its true economic potential.
Job creation challenge quantified: “There is simply no other way to create the 50-70 million jobs needed for the people joining the labor force and to reduce unemployment over the next decade.”
International community role: must listen to hopeful voices and provide support including financing, technical assistance, and market access.

The IMF states it stands ready to help, working closely with members in the region and willing to “walk the path with them.”
Forms of support offered:
- Best policy advice possible.
- Financial help if requested.
- Technical assistance to help build better institutions.
Examples of IMF technical assistance cited:
- Helping Egypt make its tax system more equitable.
- Helping Libya develop a modern system of government payments.
- Helping Tunisia improve its financial sector.
- Helping Jordan with fuel subsidy reform.

Source: The Arab Spring, One Year On by Christine Lagarde, December 6, 2011.