Stabilization and Adjustment: Towards Inclusive and Sustainable Policies in MENA

In some ways, the economic and financial situations in several MENA countries resemble those that prevailed in the late 1980s and early 1990s. Back then, structural adjustment programs managed to gradually reduce macro-imbalances, but the forced rollback of the state led to a worsening of state services, halting social mobility. At the same time, the economy was only liberalized in a selective manner, resulting in the development of a form of capitalism with limited competition and innovation, which did not manage to generate sufficient inclusive growth.

How to address the current dual pressures of unsustainable macro and weak growth structure; is now again a central question. Lessons from the 1980s should help develop a more sustainable response in the 2020s. The challenges are in some ways more difficult now – populations have grown larger, export-led growth is more challenging, the climate imperative has become pressing, and the relatively high level of social mobilization complicates policy choices. Fiscal retrenchment risks inflaming the street if it does not, in parallel, create new hopes for a better future. The economies also have a prevalent informal sector that absorbs a large share of the labor force which is out of the social protection network and extremely vulnerable to shocks.

But there are also positive developments since the 1980s. Social mobilization has empowered youth groups to have more voice and agency, a gender revolution has brought new voices to the national debates and new actors in the labor force, the technological revolution has unleashed powerful tools for productivity improvement as well as social organization, the private sector has taken root, and a greener future offers new source of sustainable growth.

The project investigates how to create a path of adjustment and growth, in which governments, civil society, the private sector, and external partners can progressively start sharing a more hopeful narrative of cooperation around a common long-term vision. Is it possible to bring in new accountability tools that can help build sufficient trust to create a momentum towards a virtuous path of inclusive growth, improved institutions, and falling inequality?

The overall objective of the project is to develop macro-economic scenarios with improved external and internal balances, and a program of structural reforms that can foster sustainable and inclusive growth paths, in Egypt, Lebanon, Tunisia, Morocco, Sudan and Jordan. The project is co-directed by a team from ERF and from FDL, and it relies on a technical secretariat.

The specific objectives of the project are as follows:
1. Produce evidence-based knowledge on the public policies that can address the trilemma of austerity, structural change, and social discontent, in order to build a better and greener future for all, including women and youth, and with a special attention to vulnerable groups.
2. Promote informed debates with policy makers (including Ministries of Finance, Planning, Social Protection), the private sector, and civil society on feasible policy and institutional innovations for inclusion and improvement of citizens’ welfare.
3. Support learning across regions that face common challenges, including with countries that can propose innovations and best practices that can be adapted to the local contexts, and present locally generated evidence to global forums.
The project has two main (sequential) components, one that focuses on cross cutting issues that matter in all the 6 countries and lessons learned from other regions/countries, and one that is country focused, zooming in on the country specificities and relevant policy implications.