G7 pledges $38bn to Arab Spring nations

Finance chiefs of several industrialised nations have turned their attention to the Arab Spring amid accusations that their previous promises to help the region’s transition from dictatorship to democracy did not materialise.

Nine international institutions agreed at Saturday’s meeting of  the G7 major economies plus Russia to “bring the financial aid available to $38 billion in the period 2011-2013 to Egypt, Tunisia, Morocco, and Jordan”, French finance minister Francois Baroin told reporters.

“This is not just words, an important step was taken this morning”.

He said that Libya, whose National Transitional Council was represented at the talks, had also been invited to join the scheme.

The financing is mostly in the form of loans, rather than outright grants.

The World Bank is putting up $10.7bn, the African Development Bank $7.6bn, the Islamic Development Bank $5.0bn with the rest coming from the European Bank for Reconstruction and Development and other lenders.

The money is earmarked to support reform and help new governments tackle short-term economic instability in the wake of popular uprisings that began in Tunisia and spread across the region.

The ministers meeting, which started on Friday in the French city of Marseille, vowed tough measures to get the global economy back on track but were short on detail and admitted the problems were so complex that a unified response was impossible.

The gathering came as stock market turmoil returned to both the US and Europe after the shock resignation of the European Central Bank’s top economist, Juergen Stark, fuelled fears over the continent’s debt crisis.

The ministers from Britain, Canada, France, Germany, Italy, Japan, Russia and the US had invited Libya’s new rulers to Marseille in a follow-up to the economic support for post-revolutionary governments announced at a G8 meeting in May.

Deauville partnership

The fledgling Libyan administration’s officials on Saturday joined Egypt, Jordan, Morocco and Tunisia to explain how they plan to relaunch their economies and hear what help they can expect from the world’s major economic powers.

“Libya attended this meeting as an observer and I’m very pleased to report that the IMF now recognises the interim governing council as the official government of Libya,” International Monetary Fund chief Christine Lagarde said.

Getting IMF recognition is significant for Libya’s interim leaders as it means international development banks and donors such as the World Bank can now offer financing.

A G8 summit in the French city of Deauville in May promised the Arab world $40bn for development and democracy in a range of international offers of aid and loans.

But this week both Egypt and Tunisia – which ousted strongmen leaders in popular uprisings and are due to hold elections before the end of the year – said they had so far received little or nothing.

Tunisia’s Finance Minister Jalloul Ayed told the Financial Times that his country had received not a penny, while his Egyptian counterpart said only $500m had come through.

Delays in delivering on the funding could complicate the transition to democracy in both north African states.

Jordan and Morocco, which have not faced popular revolutions but whose kings have promised steps towards more democratic representation, joined the so-called Deauville Partnership after the initial members Egypt and Tunisia.

Delegations taking part in Saturday’s G8 meeting included representatives of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar and Turkey.

Regional bodies present included the Arab monetary fund, the Arab fund for economic and social development and the OPE C’s fund for international development, OF ID.