One expected outcome of transparent and accountable governance under the rule of law is financial transparency, which is also an intrinsic component of governance. Optimal economic policies are crafted so as to be as responsive as possible to civil society while encouraging free and competitive markets in which the productive forces of the private sector may flourish. Sound regulations and macro-economic policies are like the balance wheel of a clock connecting the state in harmony with the private sector and civil society.

Most Arab states have made major commitments to economic reforms that are designed to liberate their markets from financial oppression and other inefficiencies, while preserving the industrial and social gains they made in the 1960s and 1970s, when foreign aid, oil revenues, and other sources of capital were more abundant. Some states have even encouraged or allowed elements of their civil societies to establish chapters in Transparency International, a transnational NGO devoted to reducing financial mismanagement.

Virtually all Arab states have engaged in some reform along some of the dimensions of financial transparency discussed below.

1. Fiscal

The "extractive" capability of a government to tax its citizens is sometimes taken to be a primary indicator of political development, but it may simply reflect the predatory, exploitative nature of a state. This section includes discussion of governmental procedures to establish a budget and taxes, hence giving a background to governmental financial transactions in a particular country. Of note in this aspect is an essential similarity in the constitutional and legislative processes, across Arab states, with respect to the state budget. Typically the legislative branch is charged with approving the socio-economic plan, and approving government budgets and final accounts. The legislature is not to be adjourned before endorsing the budget, but if it is not approved before the new fiscal year, the previous budget is enacted until such time as the new one is approved.

2. Public Audit

Public audit institutions serve the purpose of establishing and ensuring transparency in financial transactions for both internal and foreign actors. By law, often codified in their national constitutions, most Arab countries have an official public audit institution. A small but growing number of Arab countries sponsor chapters of Transparency International to combat corruption.

3. Public Procurement

The purchase of goods and services by governments and their public sectors is a major source of corruption in many countries. A growing number of Arab countries are making their procedures of soliciting tenders and evaluating offers more public and transparent.

4. Banking

Banks, which allocate credit, are the major investors in the region because economic enterprises tend to depend more on credit than on private capital and stock markets. Sound banking sectors also tend to attract outside investors. Central banks, with varying degrees of autonomy from their government ministries of finance and top executive authorities, control monetary policy and thus manage their respective macro-economies.

The central banks also supervise their respective commercial banking systems and have taken active measures to increase the amounts of financial information that they publicly disclose, to control the quality of their loan portfolios and diminish the proportion of non-performing loans, and to monitor accounts so as to prevent money laundering and the financing of terrorist operations. The central banks have also tended to encourage privately owned, nationally based financial institutions, including the new Islamic banks. These banks have transformed old Islamic trading practices into novel financial instruments for conducting transactions free of the interest found in conventional Western financial systems.

5. Privatization

A number of the Arab governments retain some overall planning authority or ministry of the economy to regulate private as well as public investment, but they are also engaging in a number of reforms to encourage privatization and the strengthening of their private sector sectors.

6. Stock Markets

Capital markets, including local stock markets in most Arab states, help to generate investment and economic growth. While most of the states in question have encouraged the development of stock markets or their equivalents, there are wide variations in the number of companies traded on the exchanges and the vitality of these institutions. In varying degrees, too, governments have used the stock exchanges to sell shares of state-owned enterprises to private investors, though most privatization has taken the form of direct sales or distributions of shares to employees.

7. Financial Institutes

The publications, forums, and online presences of specialized economic and financial institutes and think tanks have proliferated in recent years and tend to enhance financial transparency.

8. International Transparency Standards

The Arab countries have become more willing in recent years to allow the International Monetary Fund to publish the annual surveys of the respective economies under Article IV and even, where relevant, the agreements reached with the IMF concerning the pursuit of economic and financial reforms. Some countries have enrolled in the IMF's General Data Dissemination System, and a few have further qualified to join the IMF's Special Data Dissemination Standard. Most countries have also engaged with the IMF and World Bank in publishing Reports on the Observance of Standards and Codes. Activities of private international rating agencies also reflect increased transparency. Standard & Poor's or Moody's rates components of the financial systems of most Arab countries.