Director of the International Monetary Fund (IMF) Christine Lagarde said the current challenge facing Arab countries was to reduce public debt, which should be lowered in a way that does not violate the standards of balance and justice.
In an interview with Asharq Al-Awsat on the eve of an international conference entitled, “Opportunity for All: Promoting Growth, Jobs, and Inclusiveness in the Arab World”, Lagarde said: "Countries in the region have some of the highest debt ratios in the world. Governments have recently made an effort to reduce deficits, but a legacy of high levels of public spending and weak revenue mobilization has resulted in levels of debt averaging around 80 percent of GDP in oil-importing Arab countries."
According to the IMF director, "servicing these debts sucks resources that would otherwise have gone to fund vital social programs and much needed infrastructure investment."
Underlining the need to reduce the debts, Lagarde noted that the current challenge was to accomplish this task in a “balanced, fair and equitable” way that supports growth.
The conference, organized by the IMF in cooperation with the Government of Morocco, is taking place in Marrakesh on Jan. 29-30,
In her exclusive interview with Asharq Al-Awsat, Lagarde called on policymakers in the Arab world to pay attention to the potential of youth and women, improve the quality of education and overcome obstacles facing the private sector in order to create jobs needed in the Arab region.
She also addressed challenges facing countries such as Tunisia, Jordan, Morocco and Egypt and expressed her optimism about opportunities that some countries have taken to attract investment, such as Morocco, which has managed to implement reforms and reduce unemployment, and Egypt, which is seeking to improve the investment environment and enhance investor confidence.
"The IMF is partnering with the Moroccan government, the Arab Monetary Fund, and the Arab Fund for Economic and Social Development to hold this conference to discuss concrete steps on two key issues for the region: jobs and growth. I expect the discussions to include ideas on how to speed up the transformation of Arab economies, and how to promote innovation and transparency to unlock the region’s economic potential," Lagarde said.
She emphasized the priority to create opportunities for women and the youth, saying: “Policymakers should invest in strengthening people’s skills by enhancing the quality of education. This includes aligning education with private sector needs, and increasing access to vocational training, apprenticeships, internships, job counseling, and placement services."
Governments must also support greater women’s contribution to the economy, which will bring significant economic benefits and help reduce poverty, according to Lagarde.
She noted that achieving this goal would necessitate measures such as flexible working hours, better access to childcare services and efficient and low-cost public transportation systems.
With regards to unemployment, the IMF director noted that the public sector was not able to create the number of jobs the region needs.
"This void must be filled by the private sector. Fostering a dynamic and vibrant private sector requires acting on many fronts, such as simplifying regulation and improving the functioning of labor markets,” she stated.
Lagarde went on to say that "small and medium size firms (SMEs) in the region do not generate enough jobs because they lack access to finance, investment, and technology, and thus lose the opportunity to participate in global markets."
"So, the private sector can certainly help. Let’s take the example of Morocco. It has succeeded in attracting foreign direct investment and has set up vocational training schools to prepare workers for dynamic sectors such as the automotive and aeronautic industries. Morocco hopes it can expand further with technology,” she stressed.
Lagarde highlighted the importance of reforms in bolstering economic development.
"Jobs will come with economic growth. Growth will come with improved business and investor confidence, which in turn will come once countries achieve economic stability. And for that, reforms are essential."
"To be successful, reform programs need to be customized to a country circumstances and fully owned by governments. It is also important that programs take into account socio-political circumstances," she added.
Asked about the impact of the increase of oil prices on Arab economies, Lagarde said this would help ease some of the economic challenges facing oil-exporting countries.
"For instance, we raised our growth projection for Saudi Arabia, from 1.1 to 1.6 percent for this year. Nevertheless, futures prices indicate markets expect the oil price to fall back to around $55 over the medium term, so it remains critical for these countries to continue their efforts to reform and diversify their economies," she noted.