83727 December 2013 – Number 112 Response of the Arab Donors To the Global Financial Crisis and the Arab Spring Mustapha Rouis1 increased from 2.8% of total DAC aid in the four Development assistance from Gulf Cooperation years before the crisis to 4.1% in the four years Council (GCC) countries and Arab financial of the crisis. Total ODA from the three Gulf institutions has been responsive in addressing countries continues to account for the lion’s development and humanitarian needs in many share of assistance from non-DAC countries developing countries. It has also been (nearly 70% during the crisis).Most aid from the responsive to the needs of Arab countries three countries is bilateral (94%), channeled undergoing political transitions, namely Egypt, through their governments and as grants (92%). Jordan, Morocco, Tunisia, and Yemen. The share of grants increased slightly during the Gulf countries expand their financial crisis as did the role of multilateral assistance. assistance: Since the global financial crisis Figure 1: Total Net ODA Disbursements of (2008–2011), the combined net official Kuwait, Saudi Arabia, and the UAE development assistance (ODA) from Kuwait, Saudi Arabia and the UAE peaked at US$ 6.5 billion in 2008at the height of the global financial crisis. It has since remained relatively high at US$ 4.8 billion annually on average (Figure 1). In real terms (2011 prices), ODA from the three countries increased by two-thirds during the crisis (2008–2011), compared to the four-years preceding the crisis. Saudi Arabia increased aid the most, continuing to lead among the three and accounting for 80% of total aid during the crisis, followed by the UAE (16%), and Kuwait (4%). Detailed information on UAE and Qatari Aid: Total ODA from the three also increased The above three GCC countries report data to significantly as a share of gross national income, OECD-DAC in aggregate terms, which does not yielding a weighted average of 0.55% during allow for analysis of recipients or sectors. 2008–2011, compared to 0.49%in the previous However, the UAE and Qatar started to publish four years. This is higher than the DAC average detailed information on their financial aid. of 0.31%, and for Saudi Arabia higher than the In 2010, the UAE became the first non-DAC United Nations target of 0.7%.The combined country with detailed aid flow information. share of aid from the three Gulf countries UAE’s Office for Coordination of Foreign Aid (OCFA), established in 2008 and its recent 1 Mustapha Rouis, Consultant, Office of the Chief Economist, successor, the Ministry of International Middle East and North Africa Region, The World Bank. This Cooperation and Development (MICAD), track MENA K&L Quick Note was cleared by Shantayanan financial aid contributions. To date, Qatar has Deverajan, Chief Economist, MENA Region, The World Bank. published four annual reports (2009-2012). In this period, the UAE gave an average of US$ 1.4 Developmental Institutions shows flows from billion in financial aid (ODA and non-ODA) the eight Arab financial institutions2 increasing annually. Most (90%) was in grants and in-kind substantially—50 percent in real terms-- over aid and the rest in concessional loans. This aid 2008–2012, as compared to the pre-crisis period was from the government (60%), the Abu Dhabi (2005–2007). Total commitments rose from US$ Fund for Development (16.5%), and foundations 4.6 billion in 2007 to reach an all-time high of and charities (23.5%). Over forty UAE US$ 8.5 billion in 2012. The bulk of assistance government and non-government agencies during 2008–2012 was provided by three provide overseas aid and the list is growing. international and regional institutions: the Islamic Development Bank ((37%), the Arab During these four years nearly one-third of Fund for Economic and Social Development disbursements were to IDA recipients, 12% to (19%), and the OPEC Fund for International countries in Sub-Saharan Africa, and 15% to Development (11%). Among national funds, the Highly Indebted Poor Countries (HIPC). The Kuwait Fund for Arab Economic Development UAE’s top five recipient countries accounted for gave the most (11%). over 50% of its aid in 2009–2012. Pakistan and Yemen were among the top five recipients each The share of Arab financial institutions’ aid to year, followed by West Bank and Gaza. In 2011, IDA recipients grew by 9 percentage points Oman (a high-income economy) received the between 2005–2007 and 2008–2012, reaching 47% highest amount - US$ 1 billion dollars, nearly of total commitments. Aid to HIPC increased by half of all UAE aid. The politically transitioning 2 percentage points, reaching 25% of all countries accounted for one-fourth of UAE aid - commitments. This was mostly due to a drop in Jordan and Yemen receiving the lion’s share. aid to Arab countries. The level and pattern of Sectorally, UAE assistance went to commodity aid during the global economic crisis (2008– aid and general programs (over 28%), social 2010) and the Arab Spring (2011–2012) has sectors (23%), infrastructure (14%), and changed little but the level and share of aid to humanitarian assistance (over 9%). Africa went up, due to a surge in aid to Egypt and Tunisia. The Qatar Foreign Aid Report 2010-2011 has new details on its financial aid which averaged US$ Figure 2: Commitments of Regional Arab Financial 540 million annually over 2007–2011. Qatari aid Institutions (US$ billions) is largely for investment projects and almost all 8 of it in grants. The government provided around 7 69% of this assistance, the remainder was by 6 NGOs, largely for humanitarian assistance. Over 5 two-thirds (69%) of Qatar’s aid was directed to 4 3 North Africa, with Egypt accounting for nearly 2 half. IDA recipients, mostly non-African, 1 account for 44% of its aid with Sub-Saharan 0 Africa receiving 8%.Development projects and 1990-94 1995-99 2000-04 2005-7 2008-10 2011-12 programs comprise 88% of Qatar’s government nominal real aid. Humanitarian assistance, mostly humanitarian relief, makes up the remaining During the global crisis, support from Arab 12%. The country’s NGOs direct 56% of their financial institutions continued to be directed assistance for development purposes and the primarily at infrastructure sectors such as rest on humanitarian assistance. Expanding Aid from Arab and Regional 2 These include the Abu Dhabi Fund for Development Financial institutions: Arab and regional (ADFD), Arab Fund for Economic and Social Development development institutions expanded their (AFESD), Arab Monetary Fund (AMF), Arab Bank for Economic Development in Africa (BADEA), Islamic assistance during the global financial crisis and Development Bank (IsDB), Kuwait Fund for Arab Economic the Arab Spring (Figure 2). Data provided by the Development (KFAED), OPEC Fund for International Secretariat of the Coordination Group of Arab Development (OFID), and Saudi Fund for Development (SFD). December 2013 · Number 112·2 transportation and energy. In 2011–2012, Detailed information from the UAE and Qatar relatively more resources went to water and for the period 2009–2012 and 2010-2011, social sectors, a trend that began in the early respectively sheds some light on the level of years of the last decade. The share of assistance assistance received by the transition countries. to agriculture and industry continued to drop. With the exception of Jordan, UAE’s assistance (measured as gross disbursements) to these Arab Donors’ Support to the Arab Spring countries was minimal in 2011 and 2012. In this Countries: The GCC countries and Arab period, the UAE disbursed on average US$ 430 regional financial institutions have provided million, of which over half was directed to significant financial assistance to countries going Jordan. In 2009–2010, the corresponding average through political transition, specifically Egypt, disbursement was US$ 230 million, nearly half Jordan, Morocco, Tunisia, and Yemen. Kuwait, going to Yemen. Data for Qatar are available Qatar, Saudi Arabia, and the UAE are also only for 2010–2011. Arab countries going committed to support Arab transition countries through political transitions took in nearly two- as part of the Deauville partnership. thirds of government assistance, with Egypt Jordan and Morocco have been invited to join taking the lion’s share (77%), followed by Libya the GCC, receiving an aid envelope of US$5 (16%), Jordan (6%), and Yemen (2%). billion each delivered over 5 years in the form of There are indications of expanding support from projects. The financing will be shared equally GCC countries to Egypt, Jordan, Morocco, among the four GCC donor countries (i.e. Tunisia, and Yemen. As of July 2013, nearly US$ US$2.5 billion from each of the four countries). 40 billion had been pledged by GCC donors to These funds were announced in 2011 but have the five countries since their uprisings (Figure proceeded on a somewhat uneven track since 3).3 Egypt gets the lion’s share (55%) of total then. Jordan has worked with the donors to GCC donor pledges, with over half the amount identify suitable projects, while the support to pledged in July 2013 alone—that is, during the Morocco has shifted to having GCC sovereign post-Morsi era. wealth funds become equity partners in Wessal Capital, an investment vehicle set up by the The bulk of the pledges are in the form of loans, government of Morocco to mobilize investments followed by commodity aid (oil, LPG and food) in tourism and infrastructure. and grants. These pledges were made for a variety of purposes, notably investment project From the beginning of 2011 to September 2012, financing (Egypt, Jordan and Morocco), GCC countries provided US$ 7.1 billion to accounting for nearly half of all the pledges; transitioning countries, representing 40% of total balance of payments and budget support (case official disbursements and nearly 30% of total of Egypt, Jordan and Tunisia), accounting for pledges made by GCC countries during this over one-third; and commodity aid (Egypt and period. Some GCC assistance was humanitarian Yemen) accounting for the rest. aid to Tunisia and Yemen to deal with increasing refugees and the internally displaced. The overall annual average of financial assistance provided to Arab Spring countries by Though GCC financial support to the Arab financial institutions in 2011 and 2012 was transitioning countries was significantly higher slightly higher than the average during the in the last two years than in the past, it still fell global economic and financial crisis, which in short of financing needs as illustrated by the turn was nearly 70 % higher than the average widening of the budget balance, the heavy prior to the crisis (Figure 4). reliance on domestic financing, the drop in reserves, and the currency depreciation. The fiscal deficit for 2013 is estimated at nearly 14% of GDP in Egypt and over 7% in Tunisia. Foreign exchange reserves dropped sharply in both, equivalent of barely 3 months of imports. 3 This amount should be interpreted with caution as it is based on media reports and may not reflect the official views of donor countries. December 2013 · Number 112·3 Figure 3: GCC Pledges to Countries in Transition IsDB, the Arab Fund for Economic and Social (US$ billion) Development, and the Arab Monetary Fund. The Saudi Fund for Development and the 25 Kuwait Fund for Arab Economic Development 20 provided assistance mainly to Egypt and 15 2013 (July) Morocco. 10 5 2012 Conclusion: In spite of the global financial and 0 2011 economic crisis, the Arab Gulf countries and Arab regional financial institutions scaled up their financial assistance during the crisis and the Arab Spring. Saudi Arabia provided the bulk 20 of assistance among donor countries, while the IsDB, the Arab Fund for Economic and Social 15 Development, and the OPEC Fund for 10 Development dominated aid by regional 5 financial institutions. 0 The Gulf countries pledged substantial financial Kuwait Qatar KSA UAE support to the countries undergoing political transitions in the wake of the Arab Spring, but 2011 2012 2013 (July) disbursements lagged behind those countries’ acute needs. Saudi Arabia has pledged the most Figure 4. Commitments of Arab Financial funding in this regard (over two-fifths of total Institutions to Countries in Transition (US$ pledges), while Egypt has received the most millions) (two-thirds of total pledges). Yemen Contact MNA K&L: Tunisia Gerard A. Byam, Director, Strategy and Operations. MENA Region, The World Bank Morocco Preeti S. Ahuja, Manager, MNADE Regional Quick Notes Team: Jordan Omer Karasapan and Roby Fields Egypt Tel #: (202) 473 8177 The MNA Quick Notes are to summarize 0 200 400 600 800 1000 lessons learned from MNA and other Bank Knowledge and Learning activities. The Notes 2011-12 2008-10 2005-7 do not necessarily reflect the views of the World Bank, its board or its member countries. There are wide country variations. Egypt and Tunisia have received significantly higher commitments (though in the case of Tunisia from a historically low level), whereas Jordan . and Morocco are experiencing a significant drop in commitments. Support for Yemen remained at about the same level as during the crisis, quite high by historical standards. The drop in financial support to Jordan and Morocco was not a lack of support to these countries, but rather a reflection of the unusually high commitments made in the previous two years. In most cases, the bulk of assistance was provided by regional institutions, notably the December 2013 · Number 112·4