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G8 raises Arab Spring financing pledge to $38 bln
The IMF promised a further $35 billion in funding to countries affected by Arab Spring uprisings and formally recognised Libya's ruling interim council as a legitimate power, opening up access to a myriad of international lenders as the country looks to rebuild after a six-month war.
September 11, 2011 3:27 by Reuters
Group of Eight finance chiefs pledged $38 billion on Saturday in financing to Tunisia, Egypt, Morocco and Jordan over 2011-13, widening a deal agreed in May and offering Libya the chance to partake too.
The IMF promised a further $35 billion in funding to countries affected by Arab Spring uprisings and formally recognised Libya’s ruling interim council as a legitimate power, opening up access to a myriad of international lenders as the country looks to rebuild after a six-month war.
G8 chair France said the figure agreed at talks in the Mediterranean port of Marseille was roughly double a sum agreed in May, when the eight economic powers met in the northern French seaside town of Deauville. In Marseille, the original Arab Spring partnership was extended to Jordan and Morocco.
Finance Minister Francois Baroin said that Libya, whose National Transitional Council was represented at the talks, had also been invited to join the so-called Deauville Partnership.
“The institutions pledged to increase their financial network to $38 billion compared with the $20 billion pledged at Deauville,” Baroin told a news conference. “These are not just words, an important step was taken this morning.”
Getting IMF recognition is significant for Libya’s interim leaders as it means international development banks and donors such as the World Bank can now offer financing.
“Libya attended this meeting as an observer and I’m very pleased to report that the IMF now recognises the interim governing council as the official government of Libya,” IMF chief Christine Lagarde told a separate news conference.
“In this context the fund will stand ready to help the authorities through all the services the fund provides. I will be sending a team in the field in Libya as soon as security is appropriate for my people to be on the ground,” she said, adding there would be a focus on aiding oil-exporting countries.
WARY OF AID-DEPENDENCE
The Marseille talks came a few days after world leaders agreed in Paris to free up billions of dollars in frozen assets to help Libya’s interim rulers restore vital services and rebuild after a conflict that ended a 42-year dictatorship.
The financing deal by the Group of Seven major economies plus Russia is aimed at supporting reform efforts in the wake of uprisings in North Africa and the Middle East.
The financing is mostly in the form of loans, rather than outright grants, and is provided half by G8 and Arab countries and half by various lenders and development banks.
It includes $10.7 billion put up by the World Bank, $7.6 billion from the African Development Bank, $5.0 billion from the Islamic Development Bank and more from the European Bank for Reconstruction and Development (EBRD) and other lenders.
International financial institutions at the G8 talks warned of the challenges faced by Arab Spring countries trying to tap external finance while faced with high risk perceptions and social and financial strains at home.
Officials called for enhanced access to developed country markets for North African and Middle Eastern products and labour to avoid aid dependency and help build up the private sector.
The Deauville initiative was set up under France’s G8 presidency to help countries swept up in the Arab Spring foster democratic reforms by making aid and development credits conditional on political and economic reforms.
G8 officials discussed the economic challenges faced by countries like Tunisia, Egypt and Libya and agreed to ramp up trade and open markets between the region and the developed world.
The EBRD is taking a lead role as it extends its lending mandate to encompass countries affected by the Arab Spring.
Delegations taking part in Saturday’s G8 meeting included representatives of Libya’s ruling interim council, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar and Turkey.
Regional bodies present included the Arab monetary fund, the Arab fund for economic and social development and the OPEC’s fund for international development, OFID.
By Annika Breidthardt and Catherine Bremer
(Editing by Mike Peacock)