The Middle East and North Africa region has weathered the economic and financial crisis better than more globally integrated regions, but the impact on poverty reduction has been deep. Regional GDP growth fell to 1.9 percent in 2009, down from 3 percent in 2008; it is expected to rebound to 4.4 percent in 2010. Across the region, the crisis has played out in different ways in different country groups.
World Bank Assistance
The World Bank stepped up its programs in the region dramatically in response to the crisis. New commitments for IBRD lending increased from $1.6 billion in fiscal 2009 to $3.5 billion in fiscal 2010, with development policy operations accounting for about half the total. IDA support rose nearly 25 percent, to $214 million in fiscal 2010, all in the form of grants.
Responding to the Recession in the Gulf Cooperation Council
and Countries Tied to It
Drops in oil prices and production have hurt the countries of the Gulf Cooperation Council (GCC), which responded aggressively by drawing on their significant financial reserves. Prospects for these countries are closely linked to demand for oil and gas.
The Bank’s Reimbursable Technical Assistance program is becoming more strategic in the GCC countries. Bahrain and Qatar signed new framework agreements. The Bank also engaged in extensive economic monitoring and provided support for economic diversification. It completed a mid-term review of the Oman Vision 2020 exercise, which had been prepared with Bank support in 1995. Diversified exporters linked to the GCC like Djibouti, Jordan, and Lebanon have been affected by second-round impacts, but these countries are likely to rebound as the GCC recovers.
Meeting the Needs of Other Oil Exporters
Among other oil exporters, increases in production, extensive reliance on natural gas, or both, partly compensated for the drop in oil prices. Barring destabilizing political developments in key countries, a moderate rebound in growth is expected in these countries in 2010.
Algeria’s nonoil and gas sectors continued to grow in fiscal 2010, sustained by large public investment programs financed with hydrocarbon revenues. The Bank reengaged in Algeria, providing support in addressing economic diversification; in design, monitoring, and evaluating public expenditures and social and economic policies; and in the narrowing of spatial disparities. In Iraq the $250 million First Programmatic Fiscal Sustainability development policy loan (DPL) was designed to mitigate the impact of the fiscal crisis, improve fiscal sustainability, and reduce fiscal and socioeconomic vulnerability to sudden drops in oil revenues. In Libya the Bank continues to support public sector and economic reforms. A comprehensive Memorandum of Understanding, signed in August 2009, envisages a program of reimbursable technical assistance activities in public expenditure management, private sector development, and the business environment, as well as the opening of a liaison office in Tripoli. The Syrian Arab Republic is expected to continue to gradually reform its economy. In the Republic of Yemen the Bank provided $205 million in IDA funds in fiscal 2010, including $60 million in additional funding for the highly successful Social Fund project. Other investment operations in the Republic of Yemen focused on increasing rural access to markets and services ($40 million), supporting the development of port cities ($35 million), fighting schistosomiasis ($25 million), enhancing access to services in urban areas ($22 million), institutional support for the Social Welfare Fund ($10 million), and improving higher education ($13 million).
Assisting Diversified Exporters in North Africa
Diversified exporters linked to Europe were initially less affected by the crisis than other countries in the region. The speed of their recovery depends on developments in Europe.
The Bank provided the Arab Republic of Egypt, Morocco, and Tunisia with rapid analytical and advisory activities and continued its long-term work on poverty, social protection, and subsidy issues.
Bank support to Egypt included a $500 million Financial Sector DPL (III) to strengthen the financial sector and enhance efficiency, and a $300 million Enhancing Access to Finance for Micro and Small Enterprises project. The projects seek to increase access to finance, promote growth and job creation, establish an inclusive financial system, and ease the impact of the crisis on micro- and small-size enterprises. The $280 million Cairo Airport Development project will ease congestion and enhance the development of the tourism sector. Other large investment lending operations approved in fiscal 2010 include the $600 million Giza North Power and the $70 million Wind Power Development projects.
Morocco’s sound macroeconomic policies and targeted stimulus package allowed it to weather the second-round effects of the crisis. A $200 million DPL supports the government’s efforts to increase access to finance by households and small- and medium-size enterprises while ensuring the stability of the financial system. A new $100 million public administration DPL and a $60 million education DPL are part of a long-term program of reforms. Another $370 million in investment lending is divided between rural development and water projects.
Despite the global crisis, which caused a significant decline in exports to Europe, Tunisia continued to manage its macroeconomy effectively. The Bank’s new Country Partnership Strategy focuses on supporting Tunisia’s transformation to a higher-value-added, knowledge-based economy. Tunisia continues to engage IBRD lending selectively and is increasing its use of the DPL to implement its development strategy. Projects not directly linked to the crisis, such as the $52 million Northern Tunis Water project and the $36 million Integrated Rural Development project, were also approved.
Supporting the West Bank and Gaza
Competent economic management and significant donor support to the West Bank have allowed it to continue growing at about 5 percent a year. The situation in Gaza remains more difficult, with the focus there on humanitarian support and the provision of basic social services. Bank support to Gaza funds targeted grants for economic institution building, crisis aid for food and utilities, projects in education and municipal development, and an active program of analytical work in these and other areas.
For more information on the Middle East and North Africa region, visit worldbank.org/mena.
Regional Snapshot, Middle East and North Africa
|Total population||0.3 billion|
|Life expectancy at birth||71 years|
|Infant mortality rate per 1,000 live births||29|
|Female youth literacy||86%|
|Number of people living with HIV/AIDS||0.5 million|
|GNI per capita||$3,594|
|GDP per capita index (1999=100)||127|
|Fiscal 2010 new commitments|
|IBRD $3,523 million|
|IDA $214 million|
|Fiscal 2010 disbursements|
|IBRD $2,119 million|
|IDA $188 million|
|Portfolio of projects under implementation as of June 30, 2010: $8.7 billion|
Note: Life expectancy at birth, infant mortality rate per 1,000 live births, and female youth literacy are for 2008; people living with HIV/AIDS is for 2007; other indicators are for 2009 from the World Development Indicators database. HIV/AIDS data are from UNAIDS/WHO's 2008 Report on the Global AIDS Epidemic.
Promoting Sustainability and Increasing Access
to Piped Water and Sewerage in Morocco
To deal with scarce and unevenly distributed rainfall, Morocco invested heavily in dams, water supply capacity, and large-scale irrigation systems. As a result of increased public spending on water supply and sanitation infrastructure, 87 percent of Moroccans now have access to potable water, compared to 50 percent in 2004. Morocco is on track to exceed the Millennium Development Goal (MDG) targets for water and sanitation services.
This strong supply focus was not accompanied by balancing policies aimed at sustainability; however, Morocco’s water management strategies needed to adapt to meet a number of challenges, including growing water deficits, gaps in service access, demographic growth, and climate change.
To help the government address these challenges through comprehensive water reform, the Bank approved a $100 million Water Sector Development Policy Loan in 2007. Before making the loan, IBRD supported extensive analytical work and capacity building. That work, along with unprecedented levels of interministerial dialogue, led to a reform program in which water-demand management, conservation and resource protection, and equitable service development in rural and poor communities improved service delivery markedly.
The government has placed new emphasis on water management policies, including development of alternatives, such as desalination and water reuse. The National Irrigation Water Efficiency Program, launched in 2008, aims to increase water efficiency by 30–50 percent by converting conventional irrigation systems to water-saving technology. To complement irrigation resources and conserve groundwater, the World Bank Group is assisting with the development of an innovative desalination private-public partnership in the Souss-Massa region.
(Read the full story.)
Investing in Concentrated Solar Power
in the Middle East and North Africa
Concentrated solar power (CSP) is essential to reducing dependence on fossil fuels and greenhouse gas emissions. But harnessing solar power costs more and is riskier than using traditional energy sources. International collaboration is therefore required to accelerate the global deployment of CSP technologies through targeted schemes providing incentives for their adoption at scale.
Toward that end, the Middle East and North Africa Clean Technology Fund Investment Plan, with cofinancing of $750 million that was approved in fiscal 2010, will mobilize an additional $4.85 billion from other sources to accelerate deployment of CSP in Algeria, Egypt, Jordan, Morocco, and Tunisia.
The Middle East and North Africa is uniquely positioned to mitigate global climate change. No other region has as favorable a combination of abundant sunshine, low precipitation, and unused flat land close to roads, networks, and transmission grids. Moreover, the economies of scale needed for global deployment of CSP can be achieved at the lowest cost of any region. The investment plan will allow the region to exploit its potential by financing an additional 1 gigawatt (GW) of generation capacity (about 15 percent of projected global capacity).
The proposed project will avoid or reduce about 1.7 million tons of carbon dioxide a year—about 1 percent total energy sector CO2 emissions from the five countries involved. If successful and replicated, the program would yield far greater global benefits. Together with planned capacity additions in the United States, Europe, and elsewhere, cost reductions and institutional learning generated by the program will facilitate faster and greater diffusion of technology in other countries that have significant potential for CSP.