Arab financial assistance to developing - particularly Arab - countries rose sharply between 1973 and 1980 but fell gradually through the 1980s, owing mainly to weakening oil prices. As a percent of GNP, however, Arab contributions remain the largest among major donors. This paper surveys the volume and distribution of Arab financing from 1973 to 1989.
Economic developments in the Arab world during 1973–89 have been intimately affected by changes in oil production and price levels—in a direct manner for oil producing Arab countries and indirectly through official assistance, employment opportunities, and workers’ remittances for most other Arab countries. The five years following the quadrupling of oil prices in 1973–74 were characterized by a massive increase in Arab donors’ growth rates, exports, current account surpluses, and total reserves. The substantially augmented national savings were used for a sharp increase in government expenditures, especially on services, and in investments, characterized by a wide range of impressive development projects.
Arab donor countries contributed slightly less than $100 billion8 to developing countries and multilateral aid agencies during the 1973–89 period (Table 1). Some Arab donors provided financial aid to developing countries before 1973, but the amounts were rather modest. Net disbursements have been closely correlated with economic developments in the Arab donor countries. In line with the major increase in oil prices in 1973–74, they increased from $2.6 billion in 1973 to $8 billion in 1975, paused at an average level of about $7.5 billion annually in 1976–77, then rose again to their highest level (about $11 billion) in 1980 and in 1981.
In addition to their major aid programs, which began in the wake of the rise in oil prices in 1973–74, Arab donor countries established 11 multilateral organizations and funds to assist developing countries. In 1981, these were supplemented by the Arab Gulf Program for United Nations Development Organizations (AGFUND), which was to coordinate the Arab assistance offered to 15 UN bodies for humanitarian projects. A profile of multilateral Arab aid agencies is given in Table 15. The largest of these agencies are the Arab Fund for Economic and Social Development (AFESD), the Islamic Development Bank (IDB), the OPEC Fund for International Development (OFID), the Arab Monetary Fund (AMF), and the Arab Bank for Economic Development in Africa (BADEA). Two funds have ceased to exist: SAAFA was merged with BADEA in 1976 and the OAPEC Special Account was not renewed after 1976. GODE discontinued its assistance in late 1978, following the Arab donors’ decision at the time to stop aid to Egypt, but resumed its activities in 1990.
Cumulative bilateral concessional assistance from Arab donor countries to developing countries from 1973 to 1989 amounted to $73.4 billion. The geographic distribution of this aid is given in Table 22 and the percentage shares in Table 23. It must be noted that the geographic distribution of about 23 percent of the total is unknown, essentially because Saudi Arabia does not publish a geographic breakdown of a large part of its aid flows. Nevertheless, based on partial information, certain salient features emerge. Between 1973 and 1989, $44.3 billion of the identified cumulative net disbursements went to Arab countries. Their share of the total reached a peak of 81 percent in 1977 and averaged 60 percent over the period.
As mentioned earlier, cumulative official assistance from Arab donor countries and Arab agencies to Arab recipient countries amounted to about $55 billion between 1973 and 1989. In comparison, net workers’ remittances to these Arab recipient countries totaled more than $87 billion over the same period (Table 35). From about $800 million in 1973, workers’ remittances grew continuously to $6.8 billion in 1980 and remained on average at about that level between 1981 and 1989. The lion’s share went to Arab countries in Africa, particularly to Egypt. The second largest recipient in Arab Africa was Morocco, followed by Algeria and Tunisia, with Mauritania, an importer of labor, experiencing net negative remittances throughout the period. Workers’ remittances to Egypt are expected to continue to grow in the years ahead, as Egyptian workers are to a certain extent replacing Jordanian and Yemeni workers who were ousted from Saudi Arabia during the Middle East conflict in 1990/91.
From 1973 through 1980, Arab financial assistance increased very rapidly in line with rising government revenues. A large part of this assistance was granted unconditionally, allowing recipient countries to implement their own development programs. Initially, these aid flows were to a large extent directed to neighboring countries, with whom the donor countries had the closest economic, social, and religious ties. With experience in development finance, the number of beneficiary countries widened over the years and the distribution of assistance among them became more equitable. Also, Arab donors set up a number of national, regional, and multilateral agencies during those years and sharply augmented their contributions to multilateral aid agencies with broad membership.