The Impact and Influence of International Financial Institutions on the Economies of the Middle East and North Africa
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THE IMPACT AND INFLUENCE OF INTERNATIONAL FINANCIAL INSTITUTIONS ON THE ECONOMIES OF THE MIDDLE EAST AND NORTH AFRICA Edited by Tarek Radwan THE IMPACT AND INFLUENCE OF INTERNATIONAL FINANCIAL INSTITUTIONS ON THE MIDDLE EAST & NORTH AFRICA Edited by Tarek Radwan Contributors Adel Abdel Ghaffar - Amr Adly - Fadil Aliriza - Toufic Haddad - Bessma Momani - Amal Nasser Stephan Roll - Mohammed Said Saadi - Bassam Yousif Friedrich Ebert Stiftung Regional Project Tunis, Tunisia 2020 Not for Sale Friedrich-Ebert-Stiftung © All rights reserved. No parts of this publication may be printed, reproduced or utilized in any from by any means without prior written permission from the publishers. The views and opinions expressed in this publication are solely those of the original authors. They do not necessarily represent those of the Friedrich-Ebert-Stiftung. English Editing: Tarek Radwan I Cover Photograph: Thomas Claes I Graphic Design: Mehdi Jelliti 2 Table of contents List of Figures and Tables ................................................................................................................................................. 4 Foreword ............................................................................................................................................................................... 5 Introduction .......................................................................................................................................................................... 6 Section I: International Financial Institutions, Crisis Intervention, and Structural Adjustment 1. Unwarranted Suffering: The IMF and Egypt’s Illusory Economic Recovery ............................................. 12 2. Perpetual Periphery: IFIs and the Reproduction of Tunisia’s Economic Dependence ........................... 26 3. Morocco and the International Monetary Fund: Elusive Development ................................................... 42 4. Jordan, IFIs, and Social Justice ................................................................................................................................ 61 Section II: IFIs and Nation-building 5. Neoliberalism and the Legacy of IFIs in the Occupied Palestinian Territory .................................. 73 6. IFI interventionism and Yemen’s Political Economy ..................................................................... 86 7. The IMF in Iraq: Negotiating US Occupation, Debt Reduction, Conditionality, and Reconstruction ... 100 Section III: Questioning IFI Logic in the Region 8. The Impact of IFIs on Youth in Egypt, Morocco, and Tunisia ..................................................... 114 9. A Missed Opportunity: Germany and the IMF-Agreement with Egypt ...................................... 126 About the Authors .................................................................................................................................................... 137 3 List of Figures and Tables Figure 1.1: Net FDI and External Debt in Egypt 2006-2017 (in billions USD) ............................................ 19 Figure 1.2: Import Composition for Egypt 2017/18 ........................................................................................... 22 Figure 6.1: Yemen’s Pre- and Post-Unification GDP Growth ............................................................................ 88 Figure 6.2: Poverty rate as a percent of the total population over time ...................................................... 92 Figure 6.3: GDP and population growth from 1991 to 2017 ......................................................................... 93 Figure 6.4: Yemen’s Oil Production (in % GDP), 1991-2017 ........................................................................... 96 Figure 7.1: Iraq’s GDP per capita (in constant and current in USD) ............................................................ 101 Figure 7.2: Key Macroeconomic Indicators in Iraq ........................................................................................... 102 Figure 7.3: Budget balance, savings, investment and inflation .................................................................... 107 Figure 9.1: The German Government’s Outstanding Risk for Egypt ...........................................................128 Table 2.1: Tunisia’s public debt composition and relation to GDP, annual budget ................................... 36 Table 3.1: Structural Adjustment Policy Impact over Time ............................................................................... 44 Table 3.2: Growth of labor productivity, capital intensity, and TPF (in %) .................................................. 47 Table 3.3: International comparisons of real growth rates (average year-on-year) .................................. 50 Table 3.4: Tracing IMF policy advice on the social dimensions of economic policy .................................. 52 Table 3.5: Changes in Total Government Expenditure in Morocco, Egypt, Jordan and Tunisia ........... 55 Table 3.6: Year-on-year real growth, % (billions of local currency/average consumer prices) ............. 55 Table 3.7: Morocco Budgetary Central Government Finance, 2012-2022 ................................................. 55 Table 4.1: IMF Loans to Jordan ................................................................................................................................... 63 Table 6.1: Preunification government spending and fiscal deficit as percent of GDP ............................. 87 Table 6.2: Notable economic indicators from unification to the civil war ................................................... 90 Table 7.1: Summary of IMF lending arrangements with Iraq (as of 1/31/2017) ......................................105 Table 9.1: Federal Export Credit Guarantees and Outstanding Risk 2014-2018 .................................... 131 Box 3.1: Safeguard Agreement with the IMF ........................................................................................................ 54 Box 3.2: Fuel price liberalization leads to stronger monopoly at the expense of purchasing power ............. 58 4 Foreword Thomas Claes This book has been a long time in the making, but it has not lost any of its relevance. Work on this publication began in 2017, when the FES regional project asked some of the authors to submit articles on the impact of recent loan agreements with the IMF in their respective countries. Egypt had just concluded one of the largest loan agreements in its history and repercussions were soon felt and seen across the country. Tunisia was already in its second IMF agreement since the revolution of 2011. Jordan and Morocco have been in similar situations. During discussions with colleagues and experts on the role of the IMF and other IFIs in the MENA region post-2011, especially in the light of the Egypt agreement, a central question emerged: have we not been there before? Egypt has lived through loans and their accompanying structural adjustment programs with impressive regularity: every decade or so another loan has been required to bail out its troubled state finances. Yet Egypt is hardly unique in this predicament: IFIs have been engaged in major projects and loans in almost all non-oil producing countries in the region, almost without interruption since the 1970s. We felt that it might be an interesting endeavor to develop an academic project, providing a more holistic and long-term perspective, to aid understandings of the underlying history of IFIs in the region, and whether 2011 truly represents a break from perennial policy prescriptions, as has been often claimed by the IFIs themselves. Writing this foreword as the Covid-19 pandemic unfolds and sends shockwaves through the global economy, particularly through the Middle East and North Africa, this publication feels even more urgent. Years of austerity policies have drained the region’s social security and health care in particular. Such weaknesses are soon laid bare during crises. State finances have little capacity to absorb yet another shock, making further interventions by the IMF in the region very likely. A closer examination of past interventions and their consequences (especially for the region’s social fabric and protection systems) is therefore urgently needed. This book would not have been possible without the motivation and dedication of its editor, Tarek Radwan. I thank him for his immense contributions to shape this project from its early stages, maintaining close collaboration with all authors and finally stewarding the entire work over to the finishing line. Of course, the book exists as a result of the quality and rich knowledge of all its contributors. I wish to thank them all for their great work, reactivity and patience throughout the publications› many turns and delays. Two scientific consultants, Ferdinand Eibl and Max Gallien, helped shape the central ideas of the contributions and drew linkages between the different chapters. Finally, I wish to thank Siba Said for unifying the format of the hundreds of footnotes and Usman Shah for the final copy editing. Tunis, in March 2020 5 Introduction Tarek Radwan If the uprisings of 2011 in the Middle East and North Africa (MENA) countries signaled an ‘Arab Awakening,’ the renewed unrest in Algeria, Iraq, Lebanon, and Sudan only serves to remind us that the underlying factors that drove these countries to demand political and economic change remains firmly entrenched as the region and the