PITAPOLICY Focus on MENA~World Bank-IMF Spring Meetings: April 20th

****Note: All PITAPOLICY comments are in italics

Follow hashtags: #ittakes #wblive #FiscalMonitor

Event: From the Arab Revolutions to Global Austerity Trends

Sponsors: Third World Network (TWN) and the Arab NGO Network for Development

Panelists: Mahinour El Badrawi (Egyptian Center for Economic and Social Rights / ECESR, Cairo, Egypt), Isabel Ortiz (Initiative for Policy Dialogue, Columbia University, New York), Kinda Mohamadieh (Arab NGO Network for Development / ANND, Beirut, Lebanon), IMF Representative (TBC), CHAIR: Bhumika Muchhala (TWN).

 

  1. Some key questions that this panel will try to address are:
    Are the fiscal, monetary, tax and investment policies being considered by governments facilitating, or hindering countries in the Arab and other regions in building an inclusive economy and supporting socio-economic recovery?
  2. Will public expenditure for the strengthening of education, health, and other social sectors be safeguarded or slashed?
  3. How is chronic and high unemployment and high food and fuel prices being addressed?

Muchala: The world has been shaken by outbreaks of civil unrest in response to the combined and lingering effects of high unemployment, worsening living conditions, and eroding confidence in governments. In the aftermath of the Arab revolutions, many countries in the region are facing serious balance of payments problems, mounting external debt, and countries such as Egypt are facing record-low foreign exchange reserves and entering into agreements with the IMF.  Contrary to public perception, austerity measures are not limited to Europe; in fact, many adjustment measures feature most prominently in developing countries. According to IMF data, 119 countries will be adjusting public expenditures in 2013, increasing to 131 countries in 2014 and the trend will continue at least until 2016.

Directing public expenditure and #investment: How can #civilsociety facilitate economic sovereignty?

  • Montez: Choiceless Democracies is the title I chose for my presentation based on South Africa. What kind of political transition will bring about positive economic programs…as we have all these external donors with all their geo-political interests.
  • What the Arab Spring countries are facing is an old banking system. Let’s talk about this word Austerity.  Unlike developed countries, where austerity is part of social psychology, in developing countries, austerity isn’t done for its own sake.
  • Look at removing fuel subsidies: IMF based on “backward calculation” which looks at repayment assuming how much domestic growth may be expected.  Alternative: look how many factories are idle.  After determining this, can look at domestic savings.
  • Arab Spring countries could look at monetary easing…Cyprus can’t do it b/c they don’t have their own currency, unlike Arab countries.
  • Change of regime argument is another alternative.  Arab countries need a new economic model. One can only grow faster if one accepts greater inequality.
  • PP: Alternative already underway in Tunisia, Egypt, Libya…Yemen with bloody results…and Morocco under “guided monarchy power”.  Accepting greater inequality was already rejected in Tunisia…and “under debate” in Bahrain 😉
  • Ortiz w/Cummins: Excessive public expenditure contractions looked at 181 countries.
  • PP: Looks like Iraq, Yemen, Sudan and Jordan appeared at the bottom of the graph shown on screen with the MOST change in public expenditure
  • Ortiz: Aside from political risk, let’s look at removing food subsidies despite high food prices between Jan . 2007-2012 looking at FAO data. Local food prices still remained high in Iraq, for example.
  • Overall, policymakers should consider, that in times of crisis, it is important to scale up social safety net investments instead of scaling down.
  • There is a concern for leakages, as we saw in the Moldova case. Poor received least coverage. Try to look for a social protection floor: children, elderly, and people with disabilities.
  • Labor Flexibiation Reforms: avaialbe evidence suggests that labor market flex will not generat decent jobs. On the contrasry, in a context of econ contrasction, it tis likely to generate labor market “precarization”…Crisis of Social Support.
  • PP: We need a better definition of “Labor flexibablization” based on the author’s terms…as well as WHAT is “precarization”!
  • El Badrawi: Argues that homegrown plans are not really homegrown in Egypt.
    How do we explain national economic plan (Pres. Nov. 2012) mirrors the same #IMF plan proposed to Mubarak?
  • Qatar, and other loan providing countries convened in October 2012 to recommend to Arab Transition countries: Tunisia, Egypt, Yemen…not quite in transition but kings are scared pantless for regime succession: Jordan, Morocco
    October 2012: recommendations for those 5 countries. Egypt “cutting untargeted and inefficient energy subsidies, transition to modern value added tax system; allow fluctuation for currency.
  • Discusses alternatives: Tax reform:  Progressive taxation currently in place hurts the poorest: 30k Egyptian pounds to 40K taxed at 10%. If you make 1 million Egyptian pounds, then the tax rate is 25%.
  • …still needs reform in a different way, including corporate tax reform

 

  • Mohamadieh: Want to discuss implications and contradictions between the advice on macro-economic balance of payments objectives.  Looking at last 2 to 3 decades in Arab countries, we see decline in manufacturing capacities, like in Egypt, as well as depression of wages among citizens.
  • Investment rights and investment zones: In 2013, IMF called for dismantling tariffs and holding back minimum capital requirements.
  • Trend of irresponsible policy advice example: 2009 IMF report: 1990s, interventionist approach there was an uneven role, and no clear mandate by board nor clear criteria, which led to ineffective ability for staff to assess macro-economic or note all risks associated.
  • PP: Speakers need to present more slowly when reading from their paper…it’s hard to follow along when no numbers or data provided!
  • PP: Morocco reporter takes issue w/Mohamedieh’s presentation. Reporter talks about World Bank issues building a dam in Morocco and not being consistent…specifies nepotism. 
  • What’s going on w/fuel subsidies regarding substitutions, like wood?

 


Leave a Comment

Filed under Analysis, Interests, PIDE (Policy, International Development & Economics)

Leave a Reply

Your email address will not be published.

* Copy This Password *

* Type Or Paste Password Here *