Arab countries like other developing countries have embarked since the early 1990s on financial sector reforms. The purpose of this study is to review and analyze the financial reform experience of the Arab countries after more than ten year of the implementation of these reforms.

Financial reforms have already brought about significant improvement in monetary and credit aggregates in many Arab countries. Financial sector reform has certainly had a noticeable impact on the cost of intermediation: real interest rates and gross interest margins. However, there is scope for even more improvements over the next years as competition enhancing measures and administrative costs reduction interventions are adopted. Moreover, the financial sector in Arab countries caters mainly to the public sector. There is a need for the monetary authorities to strengthen and promote private sector activities and ensure that the public sector does not crowd it out. Furthermore, Arab capital markets remain relatively small and face various constraints.