Tag: poverty

Egypt Takes $5.2 Billion IMF Loan to Support Economy

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The International Monetary Fund in Washington DC has approved Cairo’s request for a $5.2 billion one-year loan. The loan that will have to be repaid within a year adds to a separate $2.77 billion package of “emergency support” granted to Egypt on May 11, to assist the country in its struggle to stop its COVID-19 epidemic.

The IMF considers Egypt to be somewhat of a pre-coronavirus success story as it complied with IMF demands for increased privatization, cutting public spending, and deregulation of industry. In May, an IMF statement said, “as the crisis abates, measures to lower the debt level would need to resume along with continued implementation of structural reforms to increase the role of the private sector.”

Egypt-IMF relationship

But the COVID-19 pandemic’s impact on tourism, global trade and oil prices has significantly impacted Egypt’s economy. Egypt relies heavily on revenues from its hotels and resorts on the Red Sea as well as tourism to its historic landmarks. Reductions in global trade have meant Egyptian state coffers see shipping fees from its vital Suez Canal reduced significantly while oil and gas revenues from Egypt’s growing energy sector similarly fell dramatically.

The fact that Egypt had recently completed a three-year economic reform plan as part of a $12 billion IMF loan that concluded in 2019 appears to have done little for the country’s economic resilience, but further austerity and privatization would eventually produce better results, according to the Fund.

Foreign priorities

Egyptian President Abdel Fattah el-Sisi had received praise from his Western backers and international bankers for implementing unpopular austerity measures that caused a dramatic rise in prices for essential goods for poor and middle class Egyptians, including a large increase in the price of electricity and drinking water. But the moves have helped “attract foreign investment,” justifying praise from the Egyptian government’s financiers.

Egypt’s transition to the neoliberal economy that foreign powers mandate has done little to produce an effective COVID-19 response. Like other countries that follow this economic mantra, such as Brazil, the US, the UK and India, COVID-19 cases have exploded with little government assistance to the country’s poorest and most vulnerable communities.

Local suffering

Egypt’s government has distributed monthly assistance of $31 for informal workers, who make up a significant section of those working in its hospitality industry. The limited support for Egyptian citizens has seen 73% of Egyptian households report a decline in their incomes over the past months.

Like Brazil, the US, and the UK, Egypt is now rushing to reopen its economy, even though it recorded 1,625 new cases on June 26, with 62,755 total confirmed cases and 2,620 deaths. The necessity to bring in revenue appears to have outweighed any desire to control the local epidemic as hygiene standards and social distancing are seen as sufficient to again receive foreign tourists.

Egyptian citizens will have to again brace for austerity measures that cut government support for the poor and increase the cost of living, while the government hopes that this time, the IMF’s demands will produce the “resilient” economy that its financiers have repeatedly promised.

MENA Region Faces Wave of Post-Lockdown Protests

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Citizens of several countries in the Middle East and North Africa (MENA) have taken to the streets following the easing of COVID-19 measures. Citizens are demanding action from their governments after having adhered to painful lockdowns and curfews that brought severe economic hardship.

In Lebanon, Iraq, Syria, and Tunisia, large protests have emerged over the last week as citizens call upon government officials to ease their suffering. While COVID-19 fears begin to wane, a new focus on structural poverty and inefficient government is emerging across the region as protesters express their discontent.

Lebanon

The Lebanese military arrested dozens of protesters on Monday, June 15, for alleged acts of vandalism. Protesters expressed their frustration with skyrocketing inflation amid a spiraling currency crisis, while the indebted nation struggles to balance its debt obligations with popular demands for a significant increase in living conditions.

After nearly two months of empty streets, economic deprivation, and fear of the coronavirus, the Lebanese people have returned to the streets to protest the lack of solutions offered by the government of Hassan Diab. Banks and shops were attacked as Lebanese people grow more desperate, even as new sanctions on neighboring country Syria are likely to further damage Lebanon’s economy.

Iraq

Newly inaugurated prime minister Mustafa al-Kadhimi’s “honeymoon phase” in government has ended quickly as increasing austerity measures are sparking furious protests. Monthly pensions were hit by a drop in oil-revenue that is forcing the government to take unpopular measures. Nearly one million Iraqis depend on their pension each month and this month the $920 pension was more than $100 short, according to France24.

The Iraqi government has introduced several ambitious reform plans, but a dramatic fall in government revenue as a result of cratered oil prices and production cuts has meant introducing painful cuts to public sector salaries and pensions. Public sector employment has served as a method to appease Iraqis since the 2003 US invasion, but falling state oil revenues have now undermined this strategy.

Syria

Syria has seen few large protests since the 2011 pro-democracy protests that started a civil war. But protests again emerged over the rise in prices of basic necessities, a doubling in food prices and continued corruption in government. The city of Druze saw four days of intense protests as the Syrian Pound continues to fall dramatically in value.

The protesters are unlikely to see a swift resolution to their concerns as the “Caesar Act,” a new round of US sanctions targeting Syria, is set to heavily impact the last remaining economic activity that has sustained the country’s flailing economy. With an apparent consolidation of power ongoing in Damascus that has gone public, Bashar al-Assad’s regime is facing renewed pressure from all sides.

Tunisia

Protests have emerged in at least seven Tunisian cities, Reuters reported on Thursday, June 18. Unemployed and economically deprived people across the country protested what they considered government inaction in the face of a continued economic crisis. University graduates shouted “we need jobs” in Gafsa and hundreds protested in Hajeb el Ayoun and Sidi Bouzid.

The Tunisian tourism sector has suffered an unprecedented crisis after COVID-19 measures closed borders and shut the industry that provides 10% of state revenue. After a decade of high inflation and unemployment, Tunisians now call for an increased focus on jobs by protesting and even halting the country’s phosphate production through sit-ins.

A new era

The current protests across the MENA-region are likely only the beginning of popular unrest in the region, with global institutes like the IMF predicting that local economies will suffer from post-lockdown economic woes for some time to come. Protests against corruption and ineffective government appear to be supported by data, and the World Bank has called for greater transparency from MENA-governments.

As global oil prices continue to be volatile, supported by painful production cuts, revenue will likely remain impacted in many oil-dependent MENA-countries. With structural economic issues in many countries, unemployment and poverty are likely to worsen in the months ahead, as the region braces itself for a new era of popular discontent.

Syrians Brace for Looming Sanctions

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On June 17, the ‘Caesar Act’ will come into effect in the United States, with potentially devastating consequences for Syria’s economy. The act consists of a broad package of sanctions that would, in effect, make it illegal for most countries to do business with Syrian enterprises.

The Caeser act shares the pseudonym of a Syrian military photographer who smuggled thousands of photographs of Syrian torture out of the country, revealing the brutality of the Syrian regime’s practices against detainees.

However, the package of sanctions could have far-reaching consequences for Syria. The war-torn country’s economy is already suffering from hyperinflation that has caused food prices to rise by 50% in a single month.

“Prices of goods in Syria, including locally produced ones, are rising with the exchange rate,” Elizabeth Tsurkov, of the Foreign Policy Research Institute told the Guardian. “The inflation is so rapid that prices in the morning would be lower than in the evening,” she explained.

Looming sanctions

The already dire situation in Syria is about to get worse since the Caesar Act will effectively penalize any country that does business with any company in Syria.

While existing EU and US sanctions already target senior regime officials and aligned business interests, the US sanctions set to trigger on June 17 will target any country that trades with Syrian entities, effectively targeting Syria’s few remaining trade-partners in neighboring countries and with businesses in Europe and the Gulf states.

The largest impact of the sanctions will be felt both in Damascus and Beirut, as trade with Lebanon has been one of the few remaining lifelines on which Syria’s fragile economy depended. Both Lebanon and Syria are facing spiraling currency crises and  the US sanctions aim to exacerbate these troubles in order to weaken Iranian influence in the two countries.

Hezbollah’s role in Lebanon’s government and Iranian support for both countries have long been a thorn in the side of the US military and the US now aims to break business ties between the two countries and plunge both into a dire economic crisis.

Victims

However, the victims of sanctions are rarely the elite that they nominally target. Rising prices of basic essentials and food scarcity are inevitable, but the regime’s leadership will always have enough to eat. The sanctions hope to make the economic situation in Syria and Lebanon so dire that the starving people will rise up and hold the governments responsible.

In over a century of sanctions, they have never actually produced this result. Sanctions on apartheid south-Africa actually further impoverished the black population, according to the then prime-minister de Klerk. Cuba has been under crushing US sanctions since it’s communist revolution, but the sanctions actually allow the regime to blame the US for any economic issues.

In Syria, an already devastated country with its infrastructure in ruins is facing an economic crisis even without the new sanctions. Rising bread prices have sparked protests which were met with counter-protests by government supporters, who directly highlighted Western sanctions as the reason for the economic troubles.

Following a nine-year conflict, Syria has few resources left to rebuild. The US now attempts to once again spark a popular uprising and reduce the influence of Iran and Hezbollah. But, after the first uprising was crushed with little to no official western backing, how are Syrians supposed to topple al-Assad now?

World Bank: Palestinian Economy Could Retract 11%

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The World Bank released a statement Monday predicting Palestine’s economy will contract by at least 7.6% and up to 11% in 2020, depending on the speed of the country’s recovery post-COVID-19. It also forecasts that unemployment, which is already high, could hit 64% in Gaza, while the poverty rate could double.

World Bank Country Director for West Bank and Gaza Kanthan Shankar praised the strict lockdown that ended last week, and helped prevent a major virus outbreak in the occupied Palestinian territories. The World Bank official warned that structural problems such as an already low growth rate and regional tensions could slow the economic recovery. 

“With the COVID-19 pandemic in its third month, the crisis is affecting Palestinian lives and livelihoods. The Palestinian Authority has acted early and decisively to save lives,” Shankar said in a June 1 press release.

“However, several years of declining donor support and the limited economic instruments available have turned the ability of the government to protect livelihoods into a monumental task. Hence, external support will be critical to help grow the economy during this unprecedented period,” he warned. 

The World Bank is also predicting a dramatic increase in the Palestinian Authority’s (PA) government debt from $800 million in 2019 to over $1.5 billion in 2020 off the back of  substantial increases in public health and social security spending, and declining revenues and donor funds. 

Developing the digital economy is one way the World Bank suggests the West Bank and Gaza could accelerate their recovery from COVID-19 and overcome the movement restrictions on people and goods that hamper Palestine’s development. A major obstacle however, is the lack of infrastructure to build a digital future for Palestine with the West Bank still operating on 3G and Gaza 2G while much of the Middle East is rolling out 4G or 5G.  

“The digital economy can overcome geographic obstacles, foster economic growth and create better job opportunities for Palestinians. With its tech-savvy young population, the potential is huge. However, Palestinians should be able to access resources similar to those of their neighbors’, and they should be able to rapidly develop their digital infrastructure as well,” Shankar added.

The report will be considered by the Ad Hoc Liaison Committee (AHLC) on June 2. The AHLC is chaired by Norway, co-sponsored by the US and EU, and seeks to promote dialogue between donors, the Palestinian Authority, and the Israeli government.

Read also: Church of the Nativity Reopens, Boosting Spirits, Palestine’s Tourism

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