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IMF: Structural Reforms Necessary for Growth, Job Opportunities

A session on structural reforms in the MENA region during the meetings of the International Monetary Fund and the World Bank in Marrakesh (Asharq Al-Awsat)
A session on structural reforms in the MENA region during the meetings of the International Monetary Fund and the World Bank in Marrakesh (Asharq Al-Awsat)
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IMF: Structural Reforms Necessary for Growth, Job Opportunities

A session on structural reforms in the MENA region during the meetings of the International Monetary Fund and the World Bank in Marrakesh (Asharq Al-Awsat)
A session on structural reforms in the MENA region during the meetings of the International Monetary Fund and the World Bank in Marrakesh (Asharq Al-Awsat)

The International Monetary Fund (IMF) and the Middle East Institute (MEI) co-hosted an exclusive panel on the sidelines of this year's Annual IMF/World Bank Meetings in Marrakech on the topic of economic structural reforms in the Middle East and North Africa region (MENA).

The "Structural Reforms to Reinvigorate Growth in MENA" session discussed on Tuesday the recent succession of economic shocks to the MENA region and the actions taken to mitigate their impact.

It also explored the impact of these actions on the MENA countries with a tight macroeconomic policy space amid a continued uncertain external environment.

The report addressed a chapter on structural reforms titled "From Setbacks to Comebacks: Reforms to Build Resilience and Prosperity."

Several participants referred to the Saudi reforms in empowering women and enhancing their participation in the labor market as a model.

They asserted that a small structural reform in the Kingdom was enough to transform the economic scene, and women now have a significant role in the labor market.

IMF's Director of the Middle East and Central Asia Department, Jihad Azour, explained that the primary goal must be to provide job opportunities for young people.

Azout indicated that structural reforms offer a way to increase potential growth and establish growth in the near term.

He noted that the reforms would be an influential factor in accelerating the pace of economic diversification among oil-exporting countries, stressing that most structural reforms help raise output, with their impact increasing over time.

The expert added that governance reforms, mainly enhancing the rule of law and government effectiveness, are especially important and can also generate positive output effects during periods of weak growth or relatively limited policy space.

Amid high public debt and inflation, fiscal consolidation and tight monetary policy are needed in many countries in the region.

In this context, structural reforms offer a way to increase potential growth and accrue near-term growth benefits.

However, Azour noted that merely maintaining macroeconomic stability will not achieve the required transformative change.

He indicated that stability represents the foundation, not the building, adding that structural reforms will also be necessary to accomplish comprehensive growth for all segments of society.

Some participants discussed the need to strengthen the role of the private sector and pave the way for it to create confidence, which in turn contributes to the arrival of investments.

Improving the government's ability to implement policies and regulations to promote private sector development also fosters growth through improved investment and productivity.

Economic and policy expert Alia Moubayed explained that the region suffers from weak growth due to high inflation.

Moubayed explained that the region can benefit significantly if it implements structural reforms, which is its only way to improve the situation.

She referred to Oman, which implemented reforms and improved its situation after several credit rating agencies lowered its rating.

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African Leaders in Beijing Eyeing Big Loans and Investment

People pass by signage for the Summit of the Forum on China-Africa Cooperation (FOCAC) in Beijing, China, 01 September 2024. (EPA)
People pass by signage for the Summit of the Forum on China-Africa Cooperation (FOCAC) in Beijing, China, 01 September 2024. (EPA)
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African Leaders in Beijing Eyeing Big Loans and Investment

People pass by signage for the Summit of the Forum on China-Africa Cooperation (FOCAC) in Beijing, China, 01 September 2024. (EPA)
People pass by signage for the Summit of the Forum on China-Africa Cooperation (FOCAC) in Beijing, China, 01 September 2024. (EPA)

African leaders descend on China's capital this week, seeking funds for big-ticket infrastructure projects as they eye mounting great power competition over resources and influence on the continent.

China has expanded ties with African nations in the past decade, furnishing them with billions in loans that have helped build infrastructure but also sometimes stoked controversy by saddling countries with huge debts.

China has sent hundreds of thousands of workers to Africa to build its megaprojects, while tapping the continent's vast natural resources including copper, gold, lithium and rare earth minerals.

Beijing has said this week's China-Africa forum will be its largest diplomatic event since the Covid-19 pandemic, with leaders of South Africa, Nigeria, Kenya and other nations confirmed to attend and dozens of delegations expected.

African countries were "looking to tap the opportunities in China for growth", Ovigwe Eguegu, a policy analyst at consultancy Development Reimagined, told AFP.

China, the world's number two economy, is Africa's largest trading partner, with bilateral trade hitting $167.8 billion in the first half of this year, according to Chinese state media.

Beijing's loans to African nations last year were their highest in five years, research by the Chinese Loans to Africa Database found. Top borrowers were Angola, Ethiopia, Egypt, Nigeria and Kenya.

But analysts said an economic slowdown in China has made Beijing increasingly reluctant to shell out big sums.

China has also resisted offering debt relief, even as some African nations have struggled to repay their loans -- in some cases being forced to slash spending on vital public services.

Since the last China-Africa forum six years ago, "the world experienced a lot of changes, including Covid, geopolitical tension and now these economic challenges", Tang Xiaoyang of Beijing's Tsinghua University told AFP.

The "old model" of loans for "large infrastructure and very rapid industrialization" is simply no longer feasible, he said.

The continent is a key node in Beijing's Belt and Road Initiative, a massive infrastructure project and central pillar of Xi Jinping's bid to expand China's clout overseas.

The BRI has channeled much-needed investment to African countries for projects like railways, ports and hydroelectric plants.

But critics charge Beijing with saddling nations with debt and funding infrastructure projects that damage the environment.

One project in Kenya, a $5 billion railway -- built with finance from Exim Bank of China -- connects the capital Nairobi with the port city of Mombasa.

But a second phase meant to continue the line to Uganda never materialized, as both countries struggled to repay BRI debts.

In central Africa, Western and Chinese firms are racing to secure access to rare minerals.

The continent has rich deposits of manganese, cobalt, nickel and lithium -- crucial for renewable energy technology.

The Moanda region of Gabon alone contains as much as a quarter of known global reserves of manganese, and South Africa accounts for 37 percent of global output of the metal.

Cobalt mining is dominated by the Democratic Republic of Congo, which accounts for 70 percent of the world total. But in terms of processing, China is the leader, at 50 percent.

Mounting geopolitical tensions between the United States and China, which are clashing over everything from the status of self-ruled Taiwan to trade, also weigh on Africa.

Washington has warned against what it sees as Beijing's malign influence.

In 2022, the White House said China sought to "advance its own narrow commercial and geopolitical interests (and) undermine transparency and openness".

Beijing insists it does not want a new cold war with Washington but rather seeks "win-win" cooperation, promoting development while profiting from boosted trade.

"We do not just give aid, give them help," Tsinghua University's Tang said.

"We are just partners with you while you are developing. We are also benefiting from it."

But analysts fear African nations could be forced to pick sides.

"African countries lack leverage against China," Development Reimagined's Eguegu said.

"Some people... think you can use the US to balance China," he said. "You cannot."