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IMFSurvey Magazine: Countries & Regions

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Deauville Partnership Broadens Support for Mideast, North Africa

Supermarket in Tripoli: The partnership could expand to other countries seeing historic change, such as Libya (photo: Louafi Larbi/Reuters)

Arab financing

Deauville Partnership Broadens Support for Mideast, North Africa

IMF Survey online

September 10, 2011

  • Deauville Partnership to support region expands membership; Libya takes part as observer
  • Mideast countries present their homegrown strategies for the medium term
  • International support is vital to advance the region’s goals

The Group of Seven (G-7) industrial nations, plus Russia, bolstered their support for Middle East and North African countries under the Deauville Partnership, an initiative launched at a leaders’ summit last May, and welcomed moves by international financial institutions to improve coordination.

At a meeting in Marseille, France, the Deauville Partnership of industrial and Mideast countries welcomed two new partners—Jordan and Morocco—while Libya participated as an observer. In addition, Kuwait, Qatar, Saudi Arabia, Turkey, and United Arab Emirates joined the Partnership to support the region’s countries going through political and economic transformation. The partnership has also grown and now incorporates nine international and regional financial institutions, including the IMF.

 Economic Challenges ahead

In a communiqué, the Deauville Partnership stressed that recent events in the Middle East and North Africa (MENA) region have challenged macroeconomic stability in the near term. In a difficult global environment with heightened financial risks and rising commodity prices, some countries have been experiencing a drop in economic activity, tourism, and investment flows, at a time when they were also faced with increased domestic social pressures due to chronically high unemployment—particularly among the young—and calls for greater freedom and fairer distribution of economic opportunities.

In a note prepared for the meeting, IMF staff projects that fiscal positions will deteriorate as governments continue to expand subsidies, transfers, and public-sector wages to meet higher social demands and reduce unemployment.

“The historical changes under way in the region are a unique opportunity for improved living standards and a more prosperous and inclusive future for the people of the region. But in the short term, they also imply challenging economic times for many MENA countries” IMF Managing Director Christine Lagarde told a press conference.

While increased public spending is necessary to preserve social cohesion, it is important that countries avoid measures that will have adverse long-term fiscal consequences or be difficult to unwind later, the IMF note stated. And better targeting of subsidies and transfers could help free up resources for investments in infrastructure and education and support for the neediest.

 
“Homegrown” strategies


At the meeting, the finance ministers of Egypt, Jordan, Morocco and Tunisia each presented their country’s medium-term national strategies for economic reform. While tailored to each country’s circumstances, these strategies show a common commitment to strengthen governance, foster economic and social inclusion, create jobs, support private sector-led growth, and advance regional and global integration. The strategies also lay out the expectations in terms of support from the Partnership.

International support is key


The Deauville Partnership meeting comes as the Middle East and North Africa region faces growing social and financial strains. Difficult global financial conditions—coupled with perceptions of heightened risk—are complicating access to external financing. The region will thus need international support in order to sustain the progress achieved to date.

“While the country strategies underscore the challenging tasks these countries face, it will be equally important for the international community to support this process,” Lagarde said.

Assistance from the international community could come in many forms, leaders of international financial institutions stressed in a statement. Development aid alone is not enough—there is also scope for institutions to provide technical assistance and help in formulating suitable economic policies. Middle Eastern products and labor must also be given greater access to developed country markets in order for the region to develop human capital, increase the role of the private sector, and avoid becoming dependent on aid.

To go further in coordinating their action, the international financial institutions have agreed to establish a dedicated Deauville Partnership coordination platform to “facilitate information sharing and mutual understanding; coordinate monitoring and reporting on the implementation of the Deauville Partnership; and identify opportunities for collaboration on financing, technical assistance, and policy and analytical work.”


The IMF recognizes new government of Libya


As the Marseille meeting concluded on September 10, the IMF announced that it now recognized Libya’s National Transitional Council as the government of this conflict-torn country.

“We stand ready to help the authorities through technical assistance, policy advice, and financial support to the country, if requested, as they begin to rebuild Libya’s economy,”  Lagarde said.