Why have the experiences of Arab countries with the IMF not succeeded?

Over the past two decades, Arab countries have been organized in their relations with the International Monetary Fund, and even those countries that were prevented by the state of armed conflict from receiving the IMF mission, have recently been able to manage these meetings in neighboring countries, as happened with Libya and Yemen, and the nature of the relationship of Arab countries with this international fund varies from one country to another.

In the Gulf countries and other Arab oil countries, the relationship was limited to technical support, and what is known as Article IV consultations of the IMF's work regulations, where economic conditions are reviewed and discussed, and advice and recommendations are made, while there is another group of Arab countries, which engage in financial facilities programs and access to loans, such as Egypt, Tunisia, Morocco, Jordan, Yemen, Mauritania, and others.

IMF programs usually focus on addressing problems related to the general budget of countries and related issues of subsidies, debts and deficits, as well as the balance of payments and its deficit affecting countries' international economic relations, and the impact of this deficit on the exchange rate and foreign exchange reserves.

Regardless of the IMF's view and its negative economic and social implications, it assumes that addressing the monetary and fiscal policy aspects would restore the economy's vitality and rid it of its problems.

Unfortunately, the experience of Arab countries and other developing countries has many aspects, which the IMF alludes to through its statements, but does not take it those countries, such as corruption and bureaucracy. While the IMF calls for reducing employment in the government and the public sector, it does not approach areas where few resources are wasted and misused in projects that do not suit the conditions of different economies.

An important observation is related to the IMF's talk on the issue of debt sustainability in the countries that deal with it, and the Fund's Managing Director Kristalina Georgieva recently alerted to the step of the issue of public debt in some countries of the Arab region, where it represented more than 90% of GDP.

But talking about debt sustainability, in the sense of the ability of countries to meet their obligations towards their debts - installments and interest - is sufficient for those countries to expand borrowing, which encourages irrational governments to expand public debt, and the IMF should encourage the accountability of countries for those debts and how to dispose of them, and the extent of transparency in obtaining and disposing of loans.

Extended Programs

The experience of the Arab countries with the International Monetary Fund is worth considering, as these programs do not lead to lifting Arab economies out of their problems, for example, the experiences of (Jordan, Morocco, Mauritania and Yemen) are just a program that ends followed by entering into a new program to obtain loans, and this did not represent a way out for these countries from their economic problems.

Morocco has four successive agreements with the IMF under the so-called "precautionary and liquidity line". During the last period, this Kingdom submitted a request to the International Monetary Fund to enter into another financing program worth up to $ 4 billion.

Jordan and Mauritania have also received financing for years, the latter having a program under which it received about $ 85 million from the IMF, and Jordan has a program covering the period from 2020-2024, under which it obtained credit facilities of about $ <> billion.

What happened to Egypt and Tunisia with the IMF is a chronic case, as they suffer from deep financing crises, with which the loans they obtained did not work. It is also worth noting that IMF programs have not positively changed the development rating of any Arab country. For example, Egypt has become the second borrower of this fund in the world, despite its regular economic reform programs since November 2016, that is, over a period of 6 years.

Policy Making

It is noteworthy that the Arab oil countries are linked to cooperation programs with the IMF, and these relations were greatly active after the crisis of the collapse of oil prices in mid-2014, as well as after the crisis of the price war in the oil market in March 2020, which led to major financial imbalances in the Arab oil countries.

This cooperation has led to the implementation of most of the Gulf countries value-added tax and excise taxes, and the review of programs to support goods and services, such as water, gas and electricity, and the movement of gasoline prices, albeit in small proportions, and in some countries these prices have become according to supply and demand in the international market, as is the case with the UAE.

The IMF's recommendations also encouraged Gulf and other Arab oil countries to reduce government and public sector employment, as well as expand public indebtedness, and we have seen Gulf states and Iraq race to issue international bonds.

In Egypt and Tunisia, there is real pressure from the IMF, which has been keen to reduce employment in the public sector and the government, as well as significantly reduce subsidy allocations, as well as enter into privatization programs.

The IMF's policies have had a significant negative impact on the economic and social conditions in both Egypt and Tunisia, leading some to express fears that these repercussions could lead to political unrest.

Why have the IMF's programs not succeeded in the Arab world?

There are several reasons, some of which are related to the political situation, and some of them are related to the economic conditions, and we will focus on these lines on the economic reasons:

• Most of the Arab countries, which used to receive loans and assistance from the IMF, made them an asset to treat their problems, and in fact they are just palliatives, and the error of this behavior has been largely evident in the cases of Egypt and Tunisia, where their crises revealed radical problems, and that the real solutions have not yet been addressed.
• Continuation of the rentier economies approach in all Arab countries, both oil and non-oil, which relied on tourism, remittances of workers abroad, and the export of raw materials. While the equation of productive activity and entering the stages of value added in the industrial and agricultural sectors is not approached.
• The absence of accountability and control over economic activity in varying proportions in all Arab countries, so the available economic resources are not disposed of properly, and perhaps the declining position of these countries on the index of corruption perceptions, economic freedom, or judicial justice, shows us the truth of the matter.
• The IMF programs to improve the conditions of the Arab economies that signed agreements with this fund did not lead to the solidity of their positions in the face of international economic fluctuations, as happened with the Corona crisis and the Russian war on Ukraine, but the crises showed more dependence of these economies abroad, exposing their citizens to conditions that endanger their food security, and increasing poverty rates.

In conclusion, reform in the Arab countries is neither impossible nor difficult, as there are countries that had the same conditions that were able to move to the ranks of emerging countries. What is needed is: better steering the compass of economic reform to the productive sectors, better employment of human resources, reducing spending on armaments and unnecessary infrastructure, unleashing the private sector to work within the framework of a development agenda, strengthening the role of the public sector away from bureaucracy and corruption, and paying attention to the conditions of education and health care for citizens.