London, Asharq Al-Awsat- The Deputy Director of the Middle East and Central Asia Department (MCD) at the International Monetary Fund (IMF) Adnan Mazarei said that it is necessary to establish a minimum level of security in Syria before the IMF and international institutions can evaluate its economic needs. In an interview with Asharq Al-Awsat, Mazarei said that “The Fund estimates the urgent humanitarian needs and costs, the costs of reconstruction and contributes to the reconstruction of the institutions that were destroyed.”

Mazarei’s interview with Asharq Al-Awsat appears below:

The Supporting Syria conference was held last week, how has the IMF contributed towards the Syrian crisis?

The IMF’s main task in this area is to assist the region to cope with the economic impact of the Syria crisis, especially the spillovers from the Syrian conflict on countries like Turkey, Lebanon and Jordan.

We have several types of engagement with countries, the first is general dialogue to give economic policy advice, the second is technical assistance which is to help countries build institutions and the third is to provide loans.

In the case of Syria, there has to be a minimum level of security established before the IMF and other institutions can go back there. Once minimum security is established we could go there and asses the needs of the economy. By assessment we mean the urgent humanitarian needs and their costs, reconstruction costs and also help recover institutions that have been destroyed.

Large numbers of refugees have come to Jordan, Lebanon and Turkey, and they have been very hospitable, but given the vast number of refugees there have been large economic burdens on those countries. They have also been deeply affected by the impact of the Syrian conflict on the economy of the region in terms of security and uncertainty. Lebanon and Jordan are countries that have incurred great budgetary costs in order to support refugees, but there have also been many costs that are not captured in their budgets. For example, there has been increasing pressure on infrastructure; schools, healthcare, education, energy and water distribution.

Aside from the refugee problem, the economies of the region have been affected in different ways. For example there has been an interruption in trade between Lebanon and Jordan and many countries; Jordanian trade used to be able to transit through Syria for exports to Turkey, Iraq and other places. Unfortunately, those borders are interrupted so they cannot transfer their goods. At the same time, because of the Syrian crisis there is a general sense of uncertainty and insecurity in the region and countries have raised security, not just by the government but also by the private sector.

How successful was the conference in terms of securing the right amount of pledges?

The conference was successful in many ways. Firstly, there was broad support and recognition of the tragic and dramatic situation of the Syrian refugees themselves, broad recognition of the necessity of providing basic and humanitarian assistance to them, and there was also recognition that countries such as Lebanon and Jordan are providing a public good for the international community. It’s important that they don’t get burdened with all the costs; they are providing a service for humanity, and it is necessary for the rest of us in the international community to support them. Of course they have high debt levels, so it’s important that they are supported by grants and highly concessional loans. The amounts that were pledged were good but much more is needed to not only meet the humanitarian needs but also create an environment and infrastructure for the employment of Syrians and the host communities, especially to provide education and other basic services.

What role has the IMF played towards the Syrian crisis?

The IMF has been helping by providing economic policies for affected countries to cope better with the pressure they are facing. Also, we have provided technical assistance for strengthening the resilience of their institutions; for example their banking systems and ministries of finance. Furthermore, in some countries like Jordan, we are assisting by putting in place policy frameworks for managing their economy, especially on their budgets.

We also provide a framework that gives comfort to donors that the money will be used within a proper economic framework which will not lead to too much debt and inflation. For example, Jordan recently completed a programme successfully with IMF support, a programme which amounted to about $2 billion and we are in the process of discussing another programme with them.

How do diplomatic tensions between Iran and Saudi Arabia and the Syrian crisis impact Middle Eastern economies?

The economies of the region are being over shadowed by two principle problems; one is the decline in the price of oil which is affecting oil producers and they will need to adjust. This issue is also affecting the oil importing countries. Although they will benefit from lower oil import bills, they could be hurt by the diminished ability of the oil producers, especially in the GCC, to provide financial assistance to these countries. The provision of financial assistance and workers’ remittances may decline.

The second major factor is the conflicts in the region which are consuming a lot of resources and are creating insecurity in the region. This leads to lower economic activity and a greater shift in resources for defense and security spending.

How will policy makers react to lower oil prices?

It appears that lower oil prices will certainly remain with us for a few years. Therefore, oil exporters need to adjust their expenditures. It is also important to raise non-oil revenues, and many oil producing countries are examining options for this.

As sanctions begin to be lifted in Iran, what are the key challenges that it faces? How will we see a change in its economic policy over the next year?

The removal of sanctions will have a positive effect by allowing Iran to produce and export more oil, it has also regained access to its international reserves which will also allow greater investment, and all of these things will encourage growth. Higher and better growth, however, will require considerable corrections to the structure of the Iranian economy to attain higher and better growth.