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Impact Of Arab Spring On Economic Reforms

The recent political turmoil in the Arab world has served to put pressure on the governments in the region to enhance economic growth and provide jobs. This will require economic reform that the governments are reluctant to make for fear of raising public anger against the elite in the business sector or that any reform could impact adversely the standard of living in the short-term.

The following are brief measures taken by a number of governments to address the political turmoil:

Algeria: Raised salaries in the public sector, generous increase of support for food items, and payment of allowances to unemployed youth. Country has reserves of $150 billion to cushion the splurge but its gas fields are reaching maximum production capacity.

Egypt: Food subsidies cost $5 billion annually. It is wasteful and corrupt. Change are necessary but will be postponed until after the 2012 election. Under popular pressure, privatizations of government businesses have been overturned.

Jordan: Government control of economy and expenditures on military are a heavy burden on budget. The recent firing of the governor of the central bank raised fears that government would use the central bank's assets to finance its deficits. The newly-designated prime minister is a former judge and it is doubtful that he would change the economic system.

Saudi Arabia: Extremely low price of electricity undermines rational consumption or switching to other forms of energy. Hopes for engaging the private sector in major infrastructure projects such as railroads have not materialized and these projects will be financed by the government. Stock market hamstrung by regulations to prevent flow of competing money from overseas.

Source: alarabonline.org , October 23, 2011

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