IMF, World Bank and the Arab Spring: Free market to run free in the Middle East?
The International Monetary Fund (IMF) and the World Bank have been holding their annual meeting in Tokyo this weekend and while all eyes will be on the Eurozone, as it faces its worst crisis in living memory, there is another region just as important and yet often forgotten.
The IMF and the World Bank have been mainstays of Middle Eastern economies for many years but the Arab Spring has provided an opportunity for them to increase their influence across the region.
In a pre-general meeting briefing, the new boss of the World Bank, Kim Yong-Yim, said that the recent revolutions have taught the institutions lessons on how to deal with the Arab world and that, “there is no one size fits all approach” to helping development.
A brief review of the IMF and the World Bank shows history contradicting Kim’s statement. While both have sought to assist developing in the global South, their rescue has been based on a ‘neo-liberal’ system of loans that depend on a total restructuring of the target country's national economy.
The most notorious example of the International Financing Institutions' (IFIs) approach was in 1980s Africa. As the ‘lenders of last resort’, the IMF and World Bank were dispatched to offer loans to governments but with strict stipulations. The conditions might have suited international companies but they ran completely contrary to the elected governments’ policies.
Nations were forced to reduce public expenditure, and often this would mean the reduction of basic state-services such as health care and staple subsidies on basics like bread and fuel. Another deal-breaker was a drastic reduction in government employees, along with the de-nationalisation of key industries and trade reform.
The economic comparisons between 1980s Africa and the Arab Spring are startling. The uprisings in the Middle East have proven to be the spark that has let the IMF and World Bank back in. According to Reuters, both are in the process of issuing loans to Morocco, Tunisia, Egypt, Libya and Jordan, in deals totalling around $60 billion - all of which will require economic reforms and will lock the countries in to long-term reform programmes.
These policies could have drastic consequences and could in turn lead to further unrest, as the reduction in subsidies further exacerbates struggling economies’ ability to feed their people. The bread riots of Egypt in 1977 and in Jordan in 1996, both arose on the back of IMF imposed cost-cutting.
Egypt has been involved in a long courtship with the World Bank and the IMF over new financial packages, worth $4.8 billion dollars. And while Christine Lagarde tries to woo Egypt into going for broke, the IMF has not shied from urging economic reform in the process, with no special allowance for the fact that Egypt is currently renationalising some key industries.
The deal is expected to go ahead, but it is not without its opponents, even though details of the loan are yet to emerge. Campaigners have said that such loans would push Egypt back to the Mubarak era: “This is what Hosni Mubarak has done to our economy and what will be done [in future] ... If we follow the same policies then how can we expect better results?" Reda Elissa one of these petititioners for economic justice was quoted by Al Ahram as saying.
The Arab Spring itself was born out of an economic crisis as Mohammed Bouazizi struggled to earn a living in Tunisia, and new loans under the auspices of development could further entrench these same problems.
But there is a glimmer of economic hope challenging Egypt’s likelihood to give in to Christine Lagarde. Egypt’s new President Mohammed Morsi said that he doesn't feel the IMF loan is in line with 'Islamic finance'. This is small fry in comparison to the lure of finance but offers some prospect of a break with the previous economic policies.
So while the world’s media remains transfixed by the Eurozone, the Arab world is facing up to a post-revolution world with new dictators: those of the IMF and the World Bank.
Tell us what you think. Can the IMF, World Bank and the Arab World ever get along? Are these loans fair, or are they an affront to democracy? Or are they necessary to rebuild economies? Do let us know your thoughts.
- Holograms Can Defeat Global Counterfeiting Epidemic and Rescue Middle Eastern Governments from Financial Challenges
- Middle Eastern governments eyeing new taxes to meet budget goals
- Interview: MBC's CEO on running one of the largest TV stations in the Middle East
- middle east duty free association holds annual board meeting in jordan
- Do something! US urges Arab Banks to choke IS funding