Most Arab countries have embarked on, or are in the process of formulating, medium-term economic reform policies with an important common objective: sustaining a high level of economic growth. This objective reflects policymakers’ increasing recognition that structural changes and financial stability are needed if their economies are to (1) provide sustainable employment opportunities for the un- and underemployed, as well as for the increasing number of nationals entering the labor force; (2) progress further in improving basic social indicators; and (3) benefit from the important changes taking place in the regional and international economies.
This paper discusses the experiences of Jordan, Algeria, and Tunisia with social safety nets. Since the beginning of their developmental efforts, these countries have accorded special attention to social development, adopting strategies that were designed to ameliorate the living standards of the population, particularly low-income groups, and improve the distribution of income. Toward this end, they established elaborate and extensive schemes to provide targeted social services and transfers in cash and kind to these groups and in untargeted services to society at large.
Some of the economic benefits of the economic reform policies carried out by Egypt and several other Arab countries began to emerge a few years ago. However, these policies have also given rise to some adverse social effects, particularly for low-income groups. The comprehensiveness of reform implementation is the ultimate major determinant of economic benefits and transient disadvantages to society, namely, the aggravation of poverty and unemployment. It is even quite likely that inconsistent and slow reform could lead to the loss of expected benefits and to the emergence of negative effects.
Ever since developing countries in the 1980s introduced a set of macroeconomic measures that are collectively referred to as “adjustment,” scholars and politicians have expressed concern about the effect of adjustment on the poor. The concern usually centers on social development, because adjustment policies may adversely affect the availability of affordable health and education services. This concern is understandable. Adjustment policies include a combination of measures designed to reduce government expenditures, to curtail—at least in the short run—private consumption, and—through changes in trade and exchange rate regimes, taxes, and subsidies—to realign consumer prices with (world) market prices. Such measures often result in price increases for food products, drugs and pharmaceuticals, and (imported) school supplies.
Since the early 1980s, in the so-called post-oil boom era, the economies of the Middle East and North Africa region (MENA) have faced major adjustment problems that have substantially slowed the growth of the regional economy as a whole.1 The required adjustments and the constraints on economic growth since the 1980s can best be analyzed in the context of the experience of growth during the oil boom years. The MENA countries achieved high rates of GDP growth and rapid structural change during the 1960s and the 1970s—some of the fastest rates of growth in the world economy. This applied to output growth rates in all the main sectors of the economy in almost all the individual countries in the region as well as the average growth rates for the region as a whole (Karshenas, 1996).
The discussion over the two days of the seminar ecompassed contributions and intervention by practically all the participants. It was lively and wide-ranging, covering specific points and personal perspectives concerning the experience of particular countries, as well as general themes pertaining to ideas, concepts, and aggregates of cross-country experience. Of the former aspect of the discussions, three specific comments on the experiences of Jordan, Algeria, and Egypt are presented separately as part of Chapter 2, under the title of Further Comments on the Experiences of Some Arab Countries. The more general main themes and highlights are presented in the following paragraphs.
Mr. Chairman, Governors, honored guests, it is a pleasure to welcome you to these meetings on behalf of the International Monetary Fund. I would also like to extend a special welcome to my friend and colleague Bob Zoellick, and to thank him for his inspiring speech. Bob’s words make it clear that the Fund and the Bank are united by a common purpose—to serve the interests of the people of our member countries—and also a common commitment to reform. Welcome Bob.
Ms. Nicole Laframboise, Ms. Patricia Alonso-Gamo, Mr. Alain Feler, Mrs. Stefania Bazzoni, Mr. Karim A. Nashashibi, and Sebastian Paris Horvitz
This paper offers Algeria's recent experience with macroeconomic stabilization and systemic transformation from a centrally planned to a market economy. The analyses focuses on the period since 1994 when Algeria embarked on a comprehensive reform program that has benefitted from IMF support, first through a one-year Stand-by Arrangement, and from May 1995, through a three-year arrangement under the Extended Fund Facility. To better understand this experience, this paper provides some background information on Algeria's political history and economic developments during the period preceding the Stand-By arrangement.
In 1994–98, Algeria was successful in restoring macroeconomic stability and implementing structural reforms. The fiscal position deteriorated in the first part of 1999, owing to low oil prices. Executive Directors supported the reform program introduced in early 2000, and welcomed its emphasis on accelerating reform of the banking and public sector companies but stressed the need for detailed implementation plans. The economic environment should be improved to promote private economic activity, including domestic and foreign investment. The authorities are urged to accelerate trade liberalization.