The Impact of IMF Loans on the Economic Growth of MENA Region Countries

Abstract

This thesis explores the complex interplay between International Monetary Fund (IMF) interventions and their economic impacts on countries in the Middle East and North Africa (MENA) region. Through an in-depth analysis of several MENA countries that have engaged with the IMF, this research aims to dissect the effects of IMF programs and political stability on economic growth, social welfare, paying close attention to the outcomes of program conditionality. Employing a methodological approach that integrates descriptive statistics and econometric models like OLS, the study meticulously analyzes macroeconomic variables before and after IMF loan interventions. It also addresses the critical issue of self-selection bias by using polity indices as instrumental variables, ensuring a nuanced understanding of the IMF’s impact. The data, sourced from the IMF and the World Economic Outlook database, and PolityV website encompasses a range of economic indicators for seven countries within the MENA region that have received IMF loans. The thesis contributes to the academic discourse on international finance and economic development by offering evidence-based policy recommendations aimed at enhancing the effectiveness of future IMF programs in the MENA region. It navigates the complexities of IMF engagements, examining both the benefits and the challenges, and seeks to provide a comprehensive overview of the multifaceted relationship between IMF loans and the socio-economic dynamics within MENA. By doing so, it aspires to guide international financial institutions, governments, and policymakers towards informed decision-making that aligns with long-term development objectives, fostering sustainable growth while minimizing adverse effects. Additionally, it aims to clear up the confusion around whether IMF loans are inherently bad for countries, providing a balanced perspective on their impact.