Arab governments’ relations with international institutions—the International Monetary Fund and the World Bank above all—are experiencing a significant change. Current events in the region have tilted the scales in favor of transparency. With more representative and open governments taking control in some Arab countries, the newly popularly empowered players are able to engage international institutions in open dialogue and even exercise some influence over the bodies. International institutions are in turn getting a fuller picture of these societies and economies.
As such, international institutions are also opening up and demonstrating a desire to engage as many stakeholders as possible when proposing new policies for respective countries. These institutions are no longer willing to be the “scape goat” and maintain cozy relationships with government officials. Increasing participation in the decisionmaking process is now the name of the game.
Before the Arab Spring, international institutions were pursuing “closed door” policies. Their success or failure was measured in terms of the number of new policies adopted, or the conditionality they imposed on some authoritarian regimes. Tunisia, a stark example, was promoted as a model of Arab economic success based on such parameters.
This pattern prevailed because international institutions and the various reports advocating their policies were premised upon a narrow interest in purely economic reforms, primarily those affecting the budget deficit, exchange rates, the rate of real GDP, the development of various sectors of the economy, and new opportunities for job creation. These institutions sought to preserve friendly relations with government representatives as much as possible.
A number of important changes have taken place since the Arab Spring. Instead of dictating pure economic policy, international institutions are engaging more players and taking a deeper and more comprehensive look at these societies and economies.
Above all, international institutions are interested in broadening the debate on public policy to include new actors in relevant states. Parliaments and some civil society institutions and unions have become more concerned with representing the interests of their constituents. These organizations no longer lack substance and independent opinions on policies under debate. Communication is thus no longer confined to the governments’ channel alone. The political debate now encompasses new actors possessed of their own views along with new groups that have grown increasingly able to influence government policies.
The gap between declared policies and the government’s commitment to actually implementing them is also now being scrutinized. Government officials can no longer just conclude agreements on changing particular laws or pieces of legislation without domestic oversight and accountability.
Institutions are beginning to take a less visible role in these countries. In the past, some institutions would closely monitor the degree to which policies were promoted on the ground, sometimes incubating those policies. If the policies yielded positive results, the credit would go to the institutions. But as dynamics shift and Arab countries continue with their democratic transitions, international institutions are no longer interested in being perceived as the drivers of policy or as pushing Arab governments in a certain direction. They prefer to leave policy choices in the hands of regional governments, which will have to bear the consequences of those choices.
International economic institutions have also begun to broach the highly sensitive topic of government spending on defense and security. In the past, such expenditures were not examined by outside actors and have not been subject to any form of oversight or accountability, even though they represent, on average, around 25 percent of government spending. But pervasive corruption in these sectors has made it necessary for international institutions to address the subject through reports and analyses whether at the country or the regional level. Without a complete analysis of expenditures, there is no other way to fully understand the drivers of public spending in Arab states.
Similarly, reports that analyze specific countries or the Middle East as a whole have come to address the practice of politicizing subsidies, taxes, and other important items. In the past, such policies implicitly favored certain groups in the society at the expense of others. Governments exercised a great deal of control over the investment and funding process.
At the policy level, there are also serious changes. For example, addressing the issue of industrial policy was nearly taboo in the World Bank and the International Monetary Fund. Now, debate within such institutions has become more amenable to such ideas and new thoughts. This is important because it puts the state back at the center of the development discussion. It also sheds light on the role that governments can play in Arab countries given five decades’ worth of failure to stir up the economy and move up the economic ladder.
Both those Arab governments that are enjoying newfound electoral legitimacy—such as Morocco, Tunisia, and Egypt—as well as those still searching for a new way to frame relations between the government and the governed—in Jordan, Iraq, and Yemen, for instance—are now able to engage international institutions in a more open dialogue. These states can exercise a degree of influence over international institutions, whose development models have received a jolt in the wake of the global financial crisis and have faced heavy criticism, by providing homegrown policy alternatives.
The question is how relations between the new Arab governments and the international institutions will develop going forward. Relations thus far have demonstrated a high degree of flexibility and a great capacity for adapting to changing circumstances. The change in the nature of these relationships is bound up with the capability of those countries receiving international assistance to offer policy alternatives that reflect the key issues afflicting them instead of adopting some rather general formulas that might not reflect their priorities.
Nevertheless, it is important not to be excessively optimistic. After all, the old pattern of relations between international institutions and governments still has its adherents, and there are still many obstacles to firmly establishing the new model of institution-government interaction.