| Kippreport.com

BLOCKED: Politics hinders aid to Arab Spring economies

June 28, 2012 5:22 by Reuters

DELAYS

 

One reason for donors’ slowness to stump up money lies within the Arab Spring countries themselves. Distracted by domestic political tensions and messy transitions to democracy, governments have been unable to promise economic policies that would convince donors their funds would be well spent.

 

Masood Ahmed, IMF director for the Middle East, told Reuters in May that to secure an IMF loan, Egypt needed to do more to reform its economic policies, find other revenue sources and secure support for the loan across its political spectrum.

 

Another obstacle to aid is that demand for it is emerging during a global financial crisis. For cash-strapped governments in Europe and the United States, following through on pledges is becoming increasingly difficult.

 

One way around this problem is providing loan guarantees rather than direct aid; the U.S. Treasury said in April it was giving Tunisia as much as several hundred million dollars in guarantees to help that country borrow in international markets. Assuming Tunisia eventually pays back its borrowing and the guarantees are not activated, Washington will be able to help the country without stumping up a significant amount of money.

 

But global markets are too weak for countries to obtain much of their funding in this way, so delays in loans and grants from the West are damaging.

 

“Calls for a Marshall-type plan come at a time when the economies and financial systems of the U.S. and the euro zone are experiencing a debt crisis, and they are not in a position to provide the necessary funds for such a plan,” said Yousif.

 

For Gulf Arab donors, the problem is not tight budgets; high oil prices over the past year have left governments flush with cash. Instead, political considerations may be making countries such as Saudi Arabia and the United Arab Emirates cautious about extending aid, analysts said.

 

In the eyes of conservative Gulf Arab governments, the success of Islamist groups via elections in Egypt, Tunisia and Morocco could pose an ideological and diplomatic threat. Deposed Egyptian president Hosni Mubarak was a longtime ally of Gulf rulers; the rise of Egypt’s Muslim Brotherhood, which this week secured the Egyptian presidency, may embolden fellow Islamists seeking revolutionary change around the Middle East.

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