Financial Support for Arab Countries in Transition

IMF Blog, August 7, 2012

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The Arab Spring has injected new optimism into the Middle East and North Africa and, if managed well, the historic transitions that are under way will lead to a more prosperous future for the people of the region.
The past year and a half has been difficult for the Arab countries in transition, with economic strains as they manage political change and urgent social demands, occurring amid turmoil in the global economy.
Programs are more likely to succeed if they are designed and owned by the national authorities and enjoy broad support within the country.

The IMF has remained closely engaged through:
- Advising countries on how to manage shocks to maintain economic stability.
- Ensuring that vulnerable households are protected during the transition.
- Helping lay the basis for job-creating growth.
- Providing technical assistance to help build capacity and stronger institutions (examples: tax reform in Egypt; public financial management in Libya; measures to strengthen the financial sector in Tunisia).
The IMF stands ready to provide financial assistance, but it must come when the countries themselves feel the timing is right and in support of economic programs that are designed by, and enjoy broad support in, the country.

Jordan:
- IMF loan approved under a Standby Arrangement in the amount of $2.05 billion.
- Purpose: support the authorities’ program to stabilize the economy and address negative impacts of exogenous shocks (mainly in its energy sector) and regional unrest.
- Expected effects: guard against additional shocks, avoid sharp adjustments that could adversely impact growth and vulnerable populations, provide liquidity over the next three years to allow gradual implementation of the national reform program with measures to protect the poor and vulnerable households.
- Support for measures to foster high and inclusive growth through improving the business environment, enhancing transparency, and fostering trade.
Morocco:
- IMF financing approved under the Precautionary and Liquidity Line (PLL) in the amount of $6.2 billion.
- Rationale: Morocco does not have an immediate need for IMF financing given its track record of sound economic policies, but faces risks from uncertainties about the euro zone and possible higher oil prices.
- Role of PLL: provide a two-year insurance policy for meeting any possible financing needs should those risks materialize.
Yemen:
- Earlier concessional loan under the Rapid Credit Facility allowed for the immediate disbursement of financial assistance to support the country’s economic recovery program following a prolonged political crisis.

Tailoring assistance:
- The IMF’s assistance varies across the region, given each country faces its own economic challenges and instruments must be tailored to those unique circumstances.
Emphasis on inclusivity and protecting the vulnerable:
- Programs focus explicitly on policies that ensure benefits of economic growth are shared more broadly and on protecting the most vulnerable members of society.
- The Arab Spring demonstrated that aggregate growth numbers alone tell only part of the story; sustainable growth must create jobs, be widely shared, and produce a broader and fairer distribution of economic opportunities.
Ownership and domestic support:
- Programs designed and owned by national authorities and enjoying broad domestic support are more likely to succeed.

$2.05 billion: IMF Standby Arrangement approved for Jordan.
$6.2 billion: IMF Precautionary and Liquidity Line (PLL) approved for Morocco (two-year PLL).
Rapid Credit Facility: concessional loan to Yemen (amount not specified in source).
188: IMF experience drawn from its 188 member countries.
"the past year and a half": timeframe referenced for difficulties faced by Arab countries in transition.
"over the next three years": liquidity provision horizon mentioned for Jordan.

Source: https://www.imf.org/en/blogs/articles/2012/08/07/financial-support-for-arab-countries-in-transition