Aid and Power in the Arab World: IMF and World Bank Lending in the Middle East and North Africa (review)

This book deals with the role of the International Monetary Fund (IMF) and The World Bank in the management of four economies in the Middle East and North Africa (MENA) during the 1990s and early 2000s. The role of these multilateral organizations was of particular importance to the region in the 1980s and 1990s; since then, however, these institutions have played a lower-key role. The authors consider the IMF and The World Bank as one of the main channels permitting and encouraging globalization.

The main hypothesis of this book is that the availability of multilateral finance to MENA countries was determined as much by geopolitical factors as by economic needs. According to the authors, with the end of communism, the United States needed a new enemy to guarantee its survival; that new enemy was Islam. As a result, regimes or allies threatened by Islamic opposition groups were rewarded for serving Western political interests and were given support for their repression of all shades of Islamic activism in the name of eradicating terrorism. Even more problematic than this claim is the authors' assertion that this repression subverted and then arrested a process of political liberalization that was nascent in the region. No evidence is presented either for the alleged US military plot or for the nascent political liberalization. Evidence of terrorism in the region is ignored. These are just two aspects of the dubious political analysis that weakens the credibility of this potentially interesting book.

On the economic side, there is one major issue that is not tackled: why did the countries examined in this book — Egypt, Jordan, Tunisia, and Morocco — need help from the IMF and The World Bank? The main reason was that the policies that they had followed became unsustainable. They had largely relied on state control to implement industrialization program with heavy protection against imports. They all relied on imports for a wide range of inputs, but failed to generate exports to pay for them. Borrowing abroad, exporting labor-receiving grants from other Arab countries sustained them until the late 1970s; however, by then the money had run out. The neglect of agriculture resulting from the policy bias in favor of industry led to shortages of domestically produced food. This increased the import bill at a time when international grain prices were rising. One of the main consequences was the inability to service foreign debt and so these countries turned to the IMF and the World Bank.

The book's strength lies in its detailed analysis of IMF and World Bank relations with the four countries and with each other in the MENA context. It shows how with the improvement of budget deficits, balance of payments and foreign debt positions that leverage of the two organizations weakened. The role of the United States in providing aid and influencing them because of its political agenda is a major theme. The chapters on the four countries show how the role of the IMF and the World Bank in the development of economic policy varied. In Egypt, the US Agency for International Development (USAID) undermined IMF and World Bank programs. As a result, Egypt achieved stabilization but not structural change leading to export-led growth. In Jordan, the government implemented reforms very slowly and partially after the shock of Tunisia's success was due to specific institutions, historical, and political factors that greatly influenced economic behavior. These meant that maintaining social achievements in times of economic stringency continued. Relative income equality as well as high educational and health indicators played an important role in the economy. Hence IMF and World Bank assertions that their programs were the cause of success are rejected. Perhaps the combination of endogenous factors and IMF/World Bank programs explains Tunisia's success.

The final country examined is Morocco. The implementation of IMF and World Bank programs...