Comparative political economy of the IMF arrangements after the Arab uprisings: Egypt and Tunisia

ABSTRACT

In the post-uprising period, while Tunisia was relatively successful in its negotiations with the International Monetary Fund (IMF), which provided it with a stand-by agreement in the amount of $1.74 billion, Egypt remained far from reaching any agreement. In an attempt to explain the difference between the IMF experiments in the two countries, that is, the factors leading to the signing of an agreement with the IMF or the inability to do so, this article proposes two arguments, based upon one positive and one negative factor: (1) distinctive domestic political dynamics and (2) the availability of alternative resources. In the two cases, the article argues that the IMF experiment was more successful in Tunisia because Tunisia enjoyed a more suitable domestic political environment which promoted and enabled reforms and thus enabled the negotiations with the IMF. Tunisia also lacked alternative resources that could be used as substitutes for the IMF loan. On the other hand, the IMF negotiations were not successful in Egypt as mounting social and political opposition decreased the ability of the government to maintain economic reforms and negotiate an IMF loan and the existence of alternative resources created disincentives. Furthermore, not only pointing out the importance of ‘alternative funds’ and the ‘domestic political environment’ with regard to the demand side of the IMF loans, this article also debates the relative strengths of the variables, and argues that alternative funds matter more than the domestic political environment.

KEYWORDS:

• Egypt
• Tunisia
• the Arab uprisings
• the IMF
• political economy of the Middle East

Acknowledgements

I am heavily indebted to Fikret Şenses (Professor of Development Economics) and Osman Bahadır Dinçer for their invaluable contribution on earlier drafts of this article. I would also like to thank USAK for the intellectual climate it provides. In addition, I would like to extend my gratitude to the two anonymous referees of Journal of North African Studies as well as Öznur Gümüş and Reyhan Güner for reviewing this work. Particularly the comments of the two anonymous referees were quite illuminating and helpful in revising the manuscript to its current form.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. See the IMF’s Articles of agreement: https://www.imf.org/external/pubs/ft/aa/pdf/aa.pdf . Accessed 31 August 2015.

2. For staff-level agreements see: http://www.imf.org/external/np/sec/pr/2012/pr12446.htm, ‘IMF reaches staff-level agreement with Egypt on a $4.8 billion Stand-By Arrangement’ November 20, 2012, IMF. August 30, 2012, and ‘IMF reaches staff-level agreement with Tunisia on two-year $1.75 billion stand-by arrangement’ April 19, 2013, IMF. http://www.imf.org/external/np/sec/pr/2013/pr13136.htm, 30 August 2015.

3. The details concerning the reviews: The first and second reviews in January 2014, $500 million, the third review in April 2014, $225 million; the fourth review in August 2014, $217.5 million; the fifth review in December 2014, $104.8 million; and the sixth review in September 2015, $301.6 million.

4. For example, the Tunisian Institute for Strategic Studies, which is a publicly funded think tank in affiliation with the office of the Tunisian president, claimed that the government gave the IMF information that described the Tunisian economy in much more gloomy situation than it was publicly presented. See ‘Think tank affiliated with President Criticizes IMF Deal’ Tunisia Live, April 24, 2013. http://www.tunisia-live.net/2013/04/24/think-tank-affiliated-with-president-criticizes-imf-deal/. Accessed September 1, 2015.

5. Osman Bahadır Dinçer’s interview with Nadia Mostafa, December 19, 2012, Cairo, Egypt.

6. Osman Bahadır Dinçer’s interview with Sayfeddin Ibrahim, December 13, 2012, Cairo, Egypt.

7. Osman Bahadır Dinçer’s interview with Amr Mousai, January 2, 2013, Cairo, Egypt.

8. For a related study, see Przeworski and Vreeland (2000).

9. For a seminal political economy discussion on democracy see Lipset (1959).

10. The author’s interview with Larry Diamond, March 27, 2014, Istanbul, Turkey.