IMF chief : Arab world must manage transition risks

The Arab world is moving into the most difficult period in its history and it needs to manage the risks of transitions well in order to reap the fruits of the Arab Spring, Christine Lagarde, Managing Director, International Monetary Fund (IMF), said in a speech on Tuesday. “We are in the middle of a delicate transition between “rejecting the past” and “defining the future”, a key psychological inflexion point,” Lagarde told audiences at the Woodrow Wilson Center. “One year on, the region stands at a critical juncture. The transition is going through a rocky patch, and the challenges are substantial, but the light remains on. And the region, together with its international partners, must make sure that this light is never extinguished. "Almost one year ago, everything changed for the people of the Middle East. The region embarked upon a historic transformation. But at the time, few realised where this journey would lead. “When Mohammad Bouazizi, the Tunisian street vendor, set himself on fire last year, who could have predicted that his tragic death would herald a whole new Middle East?,” she wondered. “Who would have foreseen that this act of desperation against a violation of human dignity would ignite a flame that would eventually illuminate the entire region, toppling governments and leading to mass awakening of social consciousness? “We all learned some important lessons from the Arab Spring. While the top-line economic numbers—on growth, for example—often looked good, too many people were being left out,” she said. “And, speaking for the IMF, while we certainly warned about the ticking time bomb of high youth unemployment in the region, we did not fully anticipate the consequences of unequal access to opportunities. Let me be frank: we were not paying enough attention to how the fruits of economic growth were being shared.” It is now much clearer that more equal societies are associated with greater economic stability and more sustained growth. "This much is clear: The Arab Spring embodies the hopes, the dreams and aspirations of a people yearning for a better way of life. Yearning for greater freedom, for greater dignity, and for a more widespread and fairer distribution of economic opportunities and resources. Basic human yearnings," she said. While each country in the region must find its own path to change, the over-arching economic goals of the Arab Spring remain clear—higher growth, growth that creates more jobs, and growth that is shared equitably among all strands of society, she said. “So how do we get there? How can we turn the dreams of the Arab Spring into reality?” she asked. At this delicate point in the transition, the risks are not only political, but also economic and financial. “We are already witnessing an economic slowdown across the oil-importing countries that is pushing up already-high unemployment and aggravating social tensions,” she said. “We must manage these risks carefully. In his context, I want to talk about two specific dimensions—macroeconomic stability and inclusive growth.” Dr Nasser Saidi, Chief Economist of the Dubai International Financial Centre, said, 60 million – or a fourth of Arab population are poor – earning less than $2 per day. “We have some of the richest countries at the same time some of the poorest people in the region. With 60 per cent young population below the age of 29 looking for employment and opportunities – the situation is explosive, especially when 20 per cent of them remains unemployed in a society where there are no social safety nets,” Dr Saidi warned audiences at a meeting in Dubai on Monday, while explaining the political and social changes that are taking place in the Arab World today. He said, if policymakers and businesses do not engage with people and invest in empowering people, especially those at the bottom of the pyramid would bring down those remaining at the top. Today, a year has passed, and the state of play remains uncertain. Spring has turned to autumn, and autumn to winter. People feel uneasy and grow impatient, Lagarde said. “This is to be expected. Momentous changes of this sort—a new society in the making—are never smooth. They are almost always messy and complicated,” she said. Amidst a darkening economic outlook and waning confidence, the Arab Spring still shines as a bright light and a beacon of hope, a symbol of what can be accomplished, she said. “This is a region that stands at the center of human civilisation. Names like Carthage and Alexandria and Damascus are forever etched in our collective consciousness. The time has come for the region to live up to its legacy,” she reminded the Arab leaders.