An Arab Marshall Plan

The charged and uncertain political climate in the Arab Spring countries constrains economic-reform efforts. In order to create the political space for reform, Arab leaders must underwrite a regional growth pact that facilitates large-scale cross-border investment and dismantles regional trade barriers.

OXFORD – The wave of revolts that swept across the Arab world two years ago were fueled by demands for freedom, bread, and social justice. But, although the revolutions toppled dictators and transformed societies, these core objectives remain as distant as ever. In fact, the economic challenges facing the Arab Spring countries have become even more pressing, weighing heavily on these countries’ political prospects.

Unemployment has nearly doubled in Tunisia and Egypt, and foreign direct investment has dried up across the Arab world. Tourism revenues, while resilient, are declining, and fiscal challenges remain considerable. But the economic urgency is not reflected in the policy response, which has been painfully slow or non-existent.

For example, Egypt’s fiscal deficit will exceed 11% of GDP this year. But the country’s leaders have been stalling on the terms of a much-needed International Monetary Fund loan. The government’s reduction of fuel subsidies last year was not followed by additional reforms, and the required tax increase was delayed soon after President Mohamed Morsi announced it.

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