Case Studies on Egypt and Tunisia

Moderator
• Hafez Ghanem, Brookings Institution & ERF

Speakers:
• Abla Abdel Latif, ECES and ERF
• Leila Baghdadi, University of Tunis and ERF

Lead Commentators:
• Reza Baqir, Alvarez & Marsal and Harvard
• Adnan Mazarei, Peterson Institute for International Economics
• Ramiro Albrieu, South American Network of Applied Economics, Red Sur


Some aspects of today’s economic and financial situations in several MENA countries resemble those that prevailed in the late 1980s-early 1990s, with structural adjustment programs gradually reducing macro-imbalances and a forced rollback of the state resulting in a degradation of public services. At the same time, selective liberalization lead to limited competition, low innovation and insufficient inclusive growth. Once again, a central question prevails: How to address the dual pressures of unsustainable macro and weak growth structure?

Lessons from the 1980s certainly apply but today’s challenges also have to deal with larger populations, export-led growth, pressing climate imperatives, increased social mobilization complicating policy choices and a prevalent informal sector evolving outside the social protection network and extremely vulnerable to shocks. MENA’s oil importing countries have to adjust to high fuel and food prices, and to rising global interest rates. Public debts are growing fast towards unsustainable levels. Already, currency devaluation and inflation are combining to lower economic growth, increase poverty, and put more stress on a battered middle-class, leading to a rise of social unrest. The challenge ahead is stark: inaction would lead to a financial crisis but austerity alone could only stabilize debt in the very short term. Failing to develop a convincing response raises the threat of a vicious cycle of economic, social, and political declines, including a retreat into populism, and destructive social polarization.

It is against this backdrop that ERF and FDL launched a joint research project on Stabilization and Adjustment in MENA, focusing on the oil importing middle-income countries of the region: Egypt, Lebanon, Tunisia, Morocco, Sudan, and Jordan. The program’s objective is clarify the macro-economic risks related to external and internal balances (and the sustainability of public and external debt), and to propose an overall strategy to tackle these risks, trying to find a balance between austerity and innovative growth measures.

A regional ERF/FDL report was launched in October 2022 in Washington DC, on the margin of the World Bank/IMF Annual Meetings. An abridged Arabic version was also made available and widely circulated. The second phase of the project focuses on country-specific research, with each country report being based on broad national consultations with its own specific areas of focus.

The aim of this regional conference is to disseminate the key findings of the six country case studies and to open a dialogue between researchers and stakeholders to inform policy debates on the more hopeful scenarios that can be attained, and which innovative reforms would be necessary to achieve these targets. This project is gratefully funded by IDRC.

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