The IMF in the Arab World: Lessons Unlearnt

Abstract

The IMF has a track record of enforcing aggressive liberalisation in trade and investment alongside contractionary policies, such as austerity measures and regressive taxation, with negative impacts on growth, employment and inequality. However, statements released by the IMF since the 2008 financial crisis have indicated that the organisation was revising its stance by depicting itself as a more flexible lending institution, focusing more on inclusive growth and social inclusion. This rhetoric of a policy shift became more evident after the 2011 Arab uprisings. Post 2011, country-specific strategies produced by the IMF for Arab countries consistently highlighted issues of social and economic inclusion as key priorities of IMF policy, indicating that they had broken with past practice and would now place more emphasis on policies aimed at inclusive growth. The post-Arab uprisings period provides an opportunity to evaluate the degree of change in IMF policies in the region. In May 2011, a group of international institutions and the G8 governments gathered under the umbrella of the Deauville Partnership and pledged up to $40 billion in loans and other assistance towards what they termed the “Arab Countries in Transition” (ACT). By 2012, the IMF had signed four loan agreements in the region: two-year loan packages with Morocco and Jordan, an emergency credit line with Yemen and a precautionary financing arrangement with Tunisia. Egypt has gone through two controversial rounds of negotiations with the IMF for a potential loan program, neither of which ultimately resulted in a loan. This report surveys the IMF’s impact on post revolutionary Arab states by documenting the history of IMF involvement in the region. It traces the change in IMF rhetoric and practice before and after 2011 in four Arab countries: Tunisia, Morocco, Jordan, and Egypt. These countries were selected because they have adopted extensive structural reforms on encouragement of the IMF and were often put forward by international financial institutions (IFIs) as successful reformers. The reports finds that IMF’s rhetoric of change, especially on social issues, was not borne out in its policy-making, either in terms of conditions attached to lending or its advice through surveillance. In light of these case studies, the implications of the IMF’s experience in the region are considered, concluding with recommendations for the future role of the IMF in the developing world, including Arab states.