Doubts About Aid to Arab Spring

The latest package of aid and loans offered over the weekend to the economies hardest hit by Arab Spring turmoil may be less help than its huge new $38 billion total suggests because emergency funds have been slow in coming and the recipients aren’t in a position to make good use of long-term aid, economists said.

The Group of Eight (G-8) finance chiefs nearly doubled the amount of aid they will make available to Middle East governments and expanded the list of recipients to include Morocco, Jordan and maybe Libya. In May, Tunisia and Egypt had been promised $20 billion in help.

Counting other institutions, including the World Bank, the International Monetary Fund (IMF), regional banks and the Arab Monetary Fund, grants and loans that could be made available to the Arab Spring economies may reach nearly $80 billion.

The aid is supposed to be delivered over the next two years, but with the Arab Spring economies buckling under the weight of unrest and political uncertainty, officials and economists said assistance is needed urgently and hasn’t arrived. Indeed, as G-8 leaders were meeting Saturday in Marseilles, an Egyptian mob stormed Israel’s embassy in Cairo causing Prime Minister Essam Sharaf to offer his resignation and sending Egyptian share prices lower.

“These countries need economic reform and political reform. They go together. But I’m not sure they have a very clear picture of what they’re doing. There is a kind of vacuum,” Paul Rivlin, a professor of economics at Tel Aviv University, told The Media Line. “The announcement expressing confidence in these countries in itself has economic meaning, but you can’t hide that these countries are in a mess.”

While the ministers welcomed turnaround plans presented by the Arab Spring governments, many of the Middle East’s economies are suffering from low growth, high inflation and rising unemployment even after strikes and protests led to the ouster of dictators and put them on the road to political reform.

Growth in the key Arab Spring economies has slowed while government spending has ballooned. In Tunisia, Minister of Planning and International Co-operation Abdel Hamid Triki estimates gross domestic product will grow 1% this year, compared with 3.5% in 2010. Egypt's net foreign reserves have fallen by $11 billion so far this year to $25 billion in August. London-based Capital Economics estimates Egypt’s GDP grew a scant 1.8% in the fiscal year ended June 30, less than the rate of population growth.