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Arab Spring nations hit delayed economic recovery
IMF official says a big challenge this year is managing the expectations of an increasingly impatient population.
May 26, 2013 8:54 by Reuters
Egypt’s foreign exchange reserves have slumped since the revolution that toppled president Hosni Mubarak in 2011 due to falling revenues from tourism and foreign investment. Jordan’s foreign reserves had also fallen sharply but have since recovered this year with an infusion of Gulf Arab capital.
Growth levels that are forecast to average around three percent this year for oil importing countries were insufficient to absorb more job entrants in a region with traditionally high unemployment that has increased since the wave of unrest that swept the region since 2011.
“Already young people are suffering unemployment levels of close to 30 percent and in last two years there have been further increase in some countries,” the IMF official added.
Governments had to grapple sooner than later with the politically sensitive subsidies that topped $240 billion in 2011 for the Middle East North Africa (MENA) region and accounted for about one half of global energy subsidies.
This was equivalent to about 8.5 percent of regional GDP, IMF figures show.
Universal energy subsidies were benefiting the top 30 percent income bracket among consumers and althoughMorocco, Jordan and Tunisia had begun to move towards targeted subsidies, more was needed to help reduce hefty subsidies that diverted much needed funds to spur growth.
“In the middle of political and social transition, it is even more difficult to undertake necessary reforms to reduce budget imbalances or try to take action to protect your reserves but the option of postponing these actions much longer really is not there for many countries,” the IMF official said.
“The margin for maneuver is much more limited and today their cushions have been used up a lot and today they find they have the ability to borrow more from domestic markets constrained and their reserves positions are such they really cannot afford to let reserves run down much further,” Ahmed said.
Lifting fuel subsidies had triggered civil unrest in Jordan last November and some analysts say the government’s move to raise prices of heavily subsidised electricity in June under an IMF standby deal was fraught with risks.
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