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Wednesday, 23 September 2020

Arab Spring economies will get worse before rebound: Tunisia's former top banker

Unsustainable spending and continued problems attracting foreign investment mean countries like Egypt and Tunisia are in for a rough ride, says ex-central bank chief

Ahmed Feteha in Gammarth, Tunisia, Tuesday 30 Oct 2012
Tunisia ex-banking chief
Mustapha Kamel, former central bank chief, during a press conference earlier in 2012 (Photo: Reuters)
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Speaking at the 'Arab Spring to Economic Spring' conference organised by the International Development Research Centre (IDRC), former bank chief Mustapha Nabli warned that turbulence was an "iron law" when it came to political turbulence of the type that has overthrown leaders in Egypt, Tunisia and beyond.
 
"Don’t expect everything to be fixed quickly. There are major challenges facing the Arab transition countries," Nabli said.
 
The only rapid improvement has been in the growing opportunities for the region's people to voice their grievances and take part in policy-making, he said.
 
He went on to describe two mains problems facing Arab countries in upheavel: the first macroeconomic, the second related to the public sector.
 
"Now is a time of macroeconomic instability, and political pressures are not helping," Nabli said.
 
He gave the example of Tunisia's state budget, which uppsed state spending by around a quarter in 2012/13, much of it directed towards subsidies rather than investment.
 
Egypt, by contrast, has adoped a more conservative approach with this year's state spending rising in line with inflation.
 
"Increasing public investment is important to fill the gap in private investments, governments sometimes up spending in response to short-term political pressure," Nabli said.
 
But he warned of the budget deficits and economic problems faced by countries like Egypt and Tunisia, saying there were by no means economically sustainable.
 
Nabli also said the private sector is likely to see problems as countries continue to see problems attracting back foreign investment.
 
Fixing the failures of previous economic development models would be the way to go, he added, saying the previous failings of weak growth and job creation will have to be tackled directly.
 
"There are specific issues that need to be addressed, aside from ideology," Nabli said.
 
"After we do that successfully, we will be on the right track."
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