Social Safety Nets in the MENA Region


 

This project seeks to understand how ineffective social safety nets in Saudi Arabia, Algeria, and Egypt  can be transformed to increase economic and social resilience and justice. The socioeconomic program at KFCRIS, is responsible in collaboration with Chatham House for the Saudi Arabia component of the project.

 

Social safety nets across economies in the Middle East and North Africa (MENA) - both hydrocarbon importers and exporters - require upgrading, reform or renewal.

However, the political economies of Saudi Arabia, Algeria, and Egypt others across the region often act as prohibitive factors to structural and systemic reform. These factors include cronyism and political-connectedness, which in turn result in those close to ruling circles benefitting excessively and disproportionately from rents and privileges.

These ‘networks of privilege’ vary across and within countries, but include benefits such as significant access to finance, monopolies, licenses, and regulatory favouritism, among others.

The consequences of cronyism and vested interests in MENA countries impact the growth and productivity of companies, trade protection measures, job creation (including the size of the informal sector), the quality and efficiency of public services, and the provision of subsidies and credit.

MENA social safety nets have largely focused on universal (or blanket) subsidies which provide affordable access to food and fuel for populations, regardless of citizens’ specific and targeted needs. For decades, governments in countries like Saudi Arabia, Algeria, and Egypt have addressed political and economic crises through expanding subsidies and/or increasing public sector employment.

While this distribution model and mode of economic and fiscal governance was popular in the short term and ratified social compacts, it has proven unsustainable in the long term, created distortions, and failed to reduce income inequalities. Moreover, it has failed to provide economic justice or increase economic and social resilience against contextual shocks such as lower oil prices and the COVID-19 pandemic.

The project seeks to support policymakers and international organisations better understand how existing ineffective social safety nets in Saudi Arabia, Algeria, and Egypt can be transformed to support increased economic and social resilience and justice, thereby addressing some of the underlying drivers of inequality and conflict in the region.