Obama offers slim pickings for Arab spring
By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
DUBAI — Barack Obama has so far provided little solace for Arab countries whose economies are engaged in a fragile transition to democracy. His much-anticipated speech promised a bit of debt relief here, a loan there, and investment across the region — but little red meat.
Perhaps more will come later. Among the pledges, Obama has asked the World Bank and the International Monetary Fund to present a plan at next week’s G8 summit on what needs to be done to stabilise Egypt and Tunisia. There’s a big need, especially in Egypt. Its economy is shrinking, the budget deficit is officially forecast to hit 10 percent of GDP in the next fiscal year and hard currency reserves are dwindling. The official reserves have fallen to $28 billion from $36 billionthis year — and the country has eaten through another $7 billion of unofficial reserves to boot.
America also promised to launch a “trade and investment partnership initiative”. Building on existing arrangements to promote trade among newly democratising countries, the European Union and the United States makes sense. It could, over time, do a lot to boost incomes if the rich nations are really willing to open up their markets. But Obama failed to spell out any details.
Meanwhile, his specific promises are useful but underwhelming. Obama promised a $2 billion facility to the region through the Overseas Private Investment Corporation, a government agency that helps U.S. businesses gain footholds in emerging markets. He also offered Egypt $1 billion of debt relief and a further $1 billion in loans to finance job creation. But even here, more could have been done. Egypt owed a total of $3.4 billion to the United States or 10 percent of its total external debt at the end of last year. The government says it needs up to $12 billion to plug a funding hole through to mid-2012.
Hopefully, America and Europe will come up with something more ambitious in the coming weeks. It would be a crying shame if an economic crisis snuffed out the Arab spring.