Arab governments to inject billions into regional development banks
- Published on Wednesday, 03 April 2013 08:13
- 0 Comments
Arab finance ministers agreed to pledge funds for big lenders in the region, at a time when several of the countries are struggling to rebound from instability.
Shareholders – donor governments – have agreed to double the capital for five financial institutions that will expand the scope of their projects to support economic development and job creation.
The Arab Fund for Economic and Social Development, alongside four other multilateral organisations, will have its capital doubled, after receiving broad consensus for the move from the Arab economic bloc of 22 countries.
“We are doubling ours from 2 billion Kuwaiti dinars ($7 billion) to 4 billion Kuwaiti dinars ($14 billion),” said Abdullatif Yousif Al Hamad, the head of the development fund on the sidelines of the annual meeting of Arab Financial Institutions and fourth meeting for the Council of Arab Ministers in Dubai.
“Most of the contributions are coming from Kuwait and Saudi Arabia. The strategies of the fund will include projects related to building power grids, infrastructure, roads, services and education.
The main recipients will be Egypt and Morocco.” Yesterday’s decision came more than two years after start of the Arab Spring uprisings in which demonstrations demanding economic development and social justice toppled leaders in Tunisia, Egypt, Libya and Yemen. “The richer countries of the region have recognised that they have to play a much more dominant role towards countries that have lagged in the last few years,” said Raza Agha, the chief economist at VTB Capital in London.
The five lenders, which have not had a capital increase since their establishment in the mid-1970s, will be provided with cash injections of 25 per cent over five years, while another 25 per cent will be taken from the bank’s reserves.
Shareholders have committed to provide fresh money on future calls for the remaining 50 per cent for the Arab Fund for Economic and Social Development, Arab Monetary Fund, Arab Bank for Economic Development in Africa, Arab Authority for Agricultural Investments and Development and the Arab Investment and Export Credit Guarantee Corporation.
The governments will pay out accordingly to the percentage of their ownership in the five lenders. A capital increase “will support and enable [Arab financial institutions] to expand their works and strengthen the partnership between the public and private sectors,” Saudi Arabia’s foreign minister, Prince Saud Al Faisal, said in a speech in January at the Arab Economic and Social Development Summit in Riyadh.
Read the full story from The National.
None of the Arab governments want to see a repeat of the Arab Spring. As such, they see the urgent need to kick-start investments in countries affected by Arab Spring as well as countries falling behind in investment and development. This is a big step in the right direction, but a lot more is needed especially from the private sectors in the region.