IMF Backs G-8 Plan for Supporting Middle East, North Africa

G-8 leaders to forge partnership with Middle East, multilateral institutions

IMF to make available up to $35 billion for the region

GDP growth of over 7 percent needed to boost employment

“The region needs to prepare for a fundamental transformation of its economic model,” said Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, who attended the G-8 summit of major industrialized countries in Deauville, France. “However, the immediate concern is that this promise should not be derailed by the multiple pressures the emerging markets of the region are now facing.”

The global partnership is being formed with countries wishing to support transition in the region, the International Monetary Fund, the World Bank, as well as other United Nations agencies and multilateral and regional development banks.

Leaders of the G-8 countries, meeting May 26 and 27 in the French seaside resort, focused on how best to aid successful transitions toward democratic societies and more inclusive, job-creating economies in light of the Arab Spring movement.

The G-8 initiative is designed to support countries in the Middle East and North Africa during this transition, while ensuring that instability in the short term does not undermine the process of political reform. Social cohesion and macroeconomic stability must also be sustained, the IMF said in a report released at the summit.

Need for outside support

Some of the region’s countries have been hit by a downturn in confidence that is affecting tourism and investment, and are relying on higher public spending to maintain social cohesion and support domestic demand, the IMF report said, noting that additional spending in the short term was understandable.

But with a fiscal deficit projected to increase to $46 billion in 2011, oil importers cannot afford to strain public finances and jeopardize the new inclusive growth agenda. Some countries will thus need external support to meet their financing requirements.

The IMF, which has already been assessing the region’s financing needs, announced it could make available as much as $35 billion as part of a broader international effort. An IMF mission is currently in Egypt to discuss possible financing with the government.

“I had the opportunity to meet with the Egyptian and Tunisian leaders, who were invited to the G-8 Summit,” said the IMF’s Acting Managing Director John Lipsky in a statement following the summit’s conclusion. “More work...