Cost of living crisis cuts a cruel swathe through Arab political economies

Special Cost of living crisis cuts a cruel swathe through Arab political economies
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The Lebanese pound has lost around 95 percent of its value since 2019, while the Egyptian pound lost half its value against the US dollar since March 2022. (LTA photo)
Special Cost of living crisis cuts a cruel swathe through Arab political economies
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People demonstrate outside Lebanon's Central Bank in Beirut in October 2021 to demand the release of their deposits blocked in Lebanese banks. (AFP)
Special Cost of living crisis cuts a cruel swathe through Arab political economies
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Special Cost of living crisis cuts a cruel swathe through Arab political economies
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A volunteer from the Lebanese NGO Beit al-Braka gives food to a hungry woman in Beirut on Feb. 24, 2021, amid Lebanon's worst economic. (AFP)
Special Cost of living crisis cuts a cruel swathe through Arab political economies
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Pupils line up at Mahaba school in Ezbet al-Nakhl, a shanty town in Cairo where the poorest of Egypt's poor eke out a living scavenging through garbage. (AFP)
Special Cost of living crisis cuts a cruel swathe through Arab political economies
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Protests over rising food prices have led to clashes in cities across Tunisia. (AFP)
Special Cost of living crisis cuts a cruel swathe through Arab political economies
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Poor Yemeni families receive flour rations and other basic food supplies on March 29, 2022, as world food prices skyrocketed amid the war in Ukraine. (AFP)
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Updated 31 January 2023

Cost of living crisis cuts a cruel swathe through Arab political economies

Cost of living crisis cuts a cruel swathe through Arab political economies
  • The middle classes of Middle East and North African countries are now feeling the impact of soaring costs
  • They have suffered triple blow of pandemic, rising food and fuel prices, and Russia’s invasion of Ukraine

DUBAI: With economies in crisis, currencies under pressure and inflation sapping purchasing power, it has long been clear that the poor of the Arab region are suffering. But as even the middle classes in some countries begin to feel the pinch as well, more families are struggling just to put food on the table.

“It’s like we were hit by an earthquake; suddenly you have to let go of everything,” Manar, a 38-year-old Egyptian mother of two, told the news agency Agence France-Presse.

“Now, whatever semi-human life people had has been reduced to thinking about how much bread and eggs cost.”




Bread prices have shot up in some Arab countries as a result of the war in Ukraine. (AFP)

The Egyptian pound has lost half its value against the dollar since March last year, following a devaluation that was demanded as part of a $3 billion International Monetary Fund loan agreement. Official annual headline inflation in the country hit 21.9 percent in December and food prices have soared by 37.9 percent.

The Egyptian economy had been struggling to recover in the wake of the COVID-19 pandemic. But it was Russia’s invasion of Ukraine that sparked the latest crisis, as both of those countries are key exporters of wheat to Egypt and sources of mass tourism.

According to the World Bank, nearly a third of Egypt’s population of 104 million people currently live below the poverty line, and almost as many are “vulnerable to falling into poverty.”

Meanwhile, gloomy economic forecasts are already casting a pall over 2023, with economists predicting a deepening global recession that will bring with it further depreciation of currencies, skyrocketing prices, and rising rates of unemployment and poverty.

In the past year there have been multiple setbacks for the world economy. Nations and businesses that were just beginning to recover from the lockdowns, restrictions and other effects of the COVID-19 pandemic suffered a fresh blow with the start of the war in Ukraine almost a year ago.

The conflict has disrupted global supply chains, causing the price of food and fuel to rise sharply, contributing to inflationary pressures. This has placed additional strain on national currencies and business confidence, endangering jobs and hobbling growth.

The depreciation of Arab currencies against the dollar is a particular concern for the most vulnerable nations because households that had built up savings prior to the economic downturn have seen the value of their financial reserves plummet and safety nets cut from beneath them.




A Lebanese activist displays mock banknotes called “Lollars” during a stunt to denounce the high-level corruption that wrecked the country in Beirut on May 13, 2022. (AFP)

The Lebanese pound recently hit another all-time low and has now lost about 95 percent of its value since the start of the financial crisis in the country in late 2019.

Jordan, Syria and Iraq are likewise experiencing massive rises in the costs of food, fuel and other essentials items while public purchasing power continues to fall, leading to protests and occasional waves of violent unrest.

The lives of about 130 million people in the region are now blighted by poverty, according to the Survey of Economic and Social Developments in the Arab Region, which was published in December by the UN Economic and Social Commission for Western Asia.

INNUMBERS

130 million - People in the Arab region affected by poverty.

12% - Unemployment rate in Arab region (highest in the world).

36% - Proportion of the Arab population in poverty by 2024. *

* excluding Libya and GCC countries

(Source: UN ESCWA)

It found that, excluding Libya and the Gulf Cooperation Council countries, more than a third of the region’s population, 35.3 percent, is now living in poverty. This rate is expected to increase over the next two years, reaching 36 percent by 2024.

The survey also revealed that the Arab region had the highest unemployment rate in the world in 2022, 12 percent, reflecting widespread economic stagnation, pressures on businesses, and the effects of government austerity measures.

The effects of inflation have not been uniformly felt across the region, however. According to Ahmed Moummi, the lead author of the survey report, it is likely that GCC countries and other oil-exporting nations will continue to benefit from higher energy prices, while oil-importing countries will experience several socioeconomic challenges.

“The current situation presents an opportunity for oil-exporting Arab countries to diversify their economies away from the energy sector by accumulating reserves and investing in projects that generate inclusive growth and sustainable development,” Moummi said.

Saudi Arabia is expected to be the fastest-growing economy in the G20 group of developed nations this year. Meanwhile, Lebanon’s economy contracted last year amid political paralysis and delays in implementing a recovery plan.




Tunisians take to the streets on January 14, 2019 to complain about the high cost of living. (AFP)

Economists said the recent effects of inflation have had disproportionately harsh effects on Arab countries that are dependent on imports of food and other essential commodities. The Arab world was already among the world’s most food-insecure regions, and in the past year the number of hungry households has increased.

Before the war in Ukraine began, Russia was the world’s biggest exporter of wheat and Ukraine the fifth-biggest, accounting for about 20 percent and 10 percent of global exports respectively, according to the Organization for Economic Cooperation and Development. Between them they were also key exporters of other important products.

The blockade of Ukraine’s Black Sea ports last year therefore resulted in massive spikes in the market prices of grain, cooking oil and fertilizers. This caused the price of staple goods such as bread to soar throughout the Arab region.




Russia's invasion of Ukraine last year disrupted the country's grain exports, jacking up food prices worldwide. (AFP)

Although a UN-brokered deal last summer summer allowed Black Sea grain shipments to resume, easing fears of a supply-side shortage, Western sanctions on Russian goods, including hydrocarbon products, raised the price of fuel and, in turn, the cost of importing and exporting.

“Food security has been jeopardized in several countries, especially those witnessing conflicts and unrest (whether political or economic), as the food basket is becoming more and more unaffordable,” Majed Skaini, regional manager of the International Comparison Program at UN ESCWA, told Arab News.

Meanwhile, because of the added pressures on governments and businesses, wages have failed to keep pace with the rising cost of living, leading to a decline in living standards in many countries and mounting levels of public anger.

People in the Arab region are “probably more adversely affected by the rising cost of living for two reasons,” An Hodgson, the global head of consumer research at Euromonitor, told Arab News.

“Firstly, consumers in the region have a relatively low savings ratio, which means that they don’t have much of a financial cushion to help them weather the cost-of-living crisis.

“In 2022, the savings ratio in the Middle East and North Africa stood at 10 percent of disposable income, below the global average of 17.6 percent. In comparison, the savings ratio in Asia Pacific was 26.7 percent of disposable income during the same year.”

The second reason is the high reliance in the region on food imports.

“In 2021 (the latest year for which Euromonitor has data), imports of foodstuffs in the Middle East and North Africa averaged $105 per capita, compared with $44 per capita in Asia Pacific and $67 per capita in Latin America,” said Hodgson.

“This means that consumers in the region are more vulnerable to soaring food prices as a result of global supply-chain and food-production disruptions.”

The mounting cost of living is putting particular pressure on the middle classes, who tend to make up the biggest and most economically active group in societies.

“We see middle classes all over the world struggling to maintain their socioeconomic status, as well as their standard of living, in the context of weak income growth, soaring inflation and the cost-of-living crisis,” said Hodgson.

“As a matter of fact, the middle class in developed countries, especially in Western Europe, have never recovered from the financial squeeze they experienced during the 2008-2009 global financial crisis.”

This squeeze has resulted in a widespread shift in consumer habits, including a fall in conspicuous consumption, more cautious spending and general belt-tightening.




Lebanese shop at a fresh-produce market in Tripoli, north of Beirut, as grinding poverty pushes many back onto the streets to eke out a living. (AFP)

According to Euromonitor’s latest findings on global consumer trends, the vast majority of households will focus on saving over the course of the coming year. Its research found that about 75 percent of consumers did not plan to increase overall spending, and 43 percent had reduced their energy consumption.

A recent survey by the World Economic Forum found 92 percent of respondents said people in their countries are “adjusting their budgets to pay for food, some even going without.”

The report added: “When asked how rising prices had impacted consumers, 68 percent said household debt had increased and 59 percent that access to healthcare had been affected.”

Many believe 2023 will be another tough year for parts of the Arab region, which will experience a further widening of the gap between the wealthier oil economies and the more unstable, import-intensive nations of the Levant and North Africa.

In Egypt, the new reality is driving families that were once considered part of the middle class to seek help. Ahmed Hesham of the Abwab El-Kheir charity said a growing number of middle-class Egyptians have been seeking assistance.

“A lot of people had life savings they were keeping aside … Now they’re using them for healthcare or daily costs,” he told AFP.

“They used to make a good living. Now they can’t make ends meet. They’ve never been in this position before and they’re mortified to come to us.

“One man told us he can either feed his kids or put them through school but not both.”

 


Sultan of Oman sets off on official visit to Iran

Sultan of Oman sets off on official visit to Iran
Updated 12 sec ago

Sultan of Oman sets off on official visit to Iran

Sultan of Oman sets off on official visit to Iran

MUSCAT: The Sultan of Oman Haitham bin Tariq al-Muazzam traveled on Sunday to Iran for a two-day official visit, during which he will meet with President Ibrahim Raisi.

This visit comes following the invitation from the Iranian president to affirm the strength of the close relations between the Sultanate of Oman and the Islamic Republic of Iran, state news agency ONA reported. 

 


UK ex-FM: Support for Iraq invasion ‘one of my deepest regrets’

Former UK Foreign Minister David Miliband has described his support for Iraq War as “one of the deepest regrets” of his career.
Former UK Foreign Minister David Miliband has described his support for Iraq War as “one of the deepest regrets” of his career.
Updated 5 min 34 sec ago

UK ex-FM: Support for Iraq invasion ‘one of my deepest regrets’

Former UK Foreign Minister David Miliband has described his support for Iraq War as “one of the deepest regrets” of his career.
  • David Miliband: ‘I voted for the war. There’s no question in my mind about quite how serious a mistake that was’
  • ‘Ukraine has enormous poverty and crimes against its own population, but what about Ethiopia, Afghanistan, Palestine?’

LONDON: Former UK Foreign Minister David Miliband has described his support for the Iraq War as “one of the deepest regrets” of his political career, The Observer reported on Sunday.

Speaking at the Hay literature festival in Wales, Miliband said the war had resulted in “real damage” to the West’s moral integrity and claims of promoting international order and justice.

He added that the invasion of Iraq may also undermine anti-Russian stances in the West over allegations of hypocrisy.

“I voted for the war; I supported the government’s position. There’s no question in my mind about quite how serious a mistake that was,” said Miliband, who is now CEO of the International Rescue Committee.

He urged audience members to consider the words of Kenyan President William Ruto, who has encouraged greater attention to be given to other parts of the world, including Palestine and Afghanistan.

Miliband said: “Yes, Ukraine has enormous poverty and crimes against its own population, but what about Ethiopia, what about Afghanistan, what about Palestine?

“And I think that’s what we have to take very, very seriously if we want to understand what’s the role of the West, never mind the UK, in global politics.”

He described the Iraq War as a “strategic mistake,” partly due to the “global lesson that it allowed to be taught.”

Though the Iraq invasion “does not excuse what happened subsequently in Ukraine,” Miliband conceded that potential Western hypocrisy is a “very, very serious point.”

He added: “Ukraine has united the West, but it’s divided the West and wider parts of the world. Forty or 50 countries have refused to join any condemnation (of Russia), not because they support the invasion of Ukraine, but they feel that the West has been guilty of hypocrisy and weakness in dealing with global problems over the last 30 years.”


Erdogan seeks third decade of rule in Turkish runoff

Erdogan seeks third decade of rule in Turkish runoff
Updated 28 May 2023

Erdogan seeks third decade of rule in Turkish runoff

Erdogan seeks third decade of rule in Turkish runoff
  • More than 64 million people are eligible to cast ballots
  • Challenger Kemal Kilicdaroglu described the runoff as a referendum on the country’s future

ISTANBUL: Turkiye voted Sunday in a historic runoff that President Recep Tayyip Erdogan entered as the firm favorite to extend two decades of his Islamic-rooted rule to 2028.
The NATO member’s longest-serving leader defied critics and doubters by emerging with a comfortable lead against his secular challenger Kemal Kilicdaroglu in the first round on May 14.
The vote was nonetheless the toughest Erdogan has faced in one of the country’s most transformative eras since its creation as a post-Ottoman republic 100 years ago, resulting in its first-ever presidential runoff.
Kilicdaroglu cobbled together a powerful coalition of Erdogan’s disenchanted former allies with secular nationalists and religious conservatives.
Opposition supporters viewed it as a do-or-die chance to save Turkiye from being turned into an autocracy by a leader whose consolidation of power rivals that of Ottoman sultans.
But Erdogan, 69, still managed to come within a fraction of a percentage point of winning outright in the first round.
His success came in the face of one of the world’s worst cost-of-living crises — and with almost every opinion poll predicting his defeat.
“I’m going to vote for Erdogan. There is no one else like him,” 24-year-old Emir Bilgin said in a working-class district of Istanbul where the future president grew up playing street football.
Kilicdaroglu re-emerged a transformed man after the first round.
The former civil servant’s old message of social unity and democracy gave way to desk-thumping speeches about the need to immediately expel migrants and fight terrorism.
His right-wing turn was targeted at nationalists who emerged as the big winners of the parallel parliamentary elections.
The 74-year-old had always adhered to the firm nationalist principles of Mustafa Kemal Ataturk, the military commander who formed both Turkiye and Kilicdaroglu’s secular CHP party.
But these had played a secondary role to his promotion of socially liberal values practiced by younger voters and big-city residents.
Analysts question whether Kilicdaroglu’s gamble will work.
His informal alliance with a pro-Kurdish party left him exposed to charges from Erdogan of working with “terrorists.”
The government portrays the Kurdish party as the political wing of outlawed militants.
And Kilicdaroglu’s courtship of Turkiye’s hard right was hampered by the endorsement Erdogan received from an ultra-nationalist who finished third two weeks ago.
Erdogan has been lionized by poorer and more rural swathes of Turkiye’s fractured society because of his promotion of religious freedoms and modernization of once-dilapidated cities in the Anatolian heartland.
“It was important for me to keep what was gained over the past 20 years in Turkiye,” company director Mehmet Emin Ayaz told AFP before voting for Erdogan in Ankara.
“Turkiye isn’t what it was in the old days. There is a new Turkiye today,” the 64-year-old said

West anticipate vote result  
The political battles are being watched closely across world capitals because of Turkiye’s footprint in both Europe and the Middle East.
Erdogan’s warm ties with the West during his first decade in power were followed by a second in which he turned Turkiye into NATO’s problem child.
He launched a series of military incursions into Syria that infuriated European powers and put Turkish soldiers on the opposite side of Kurdish forces supported by the United States.
His personal relationship with Russian President Vladimir Putin has also survived the Kremlin’s war on Ukraine despite Western sanctions against Moscow.
Turkiye’s troubled economy is benefiting from a crucial deferment of payment on Russian energy imports, which helped Erdogan spend lavishly on campaign pledges this year.
Erdogan also delayed Finland’s membership of NATO and is still refusing to let Sweden join the US-led defense bloc.
The Eurasia Group consultancy said Erdogan was likely to continue trying to play world powers off each other should he win.
“Turkiye’s relations with the US and the EU will remain transactional and tense,” it said.

Impact on economy  
Turkiye’s unraveling economy will pose the most immediate test for whoever wins the vote.
Erdogan went through a series of central bankers until he found one who started enacting his wish to slash interest rates at all costs in 2021 — flouting the rules of conventional economics in the belief that lower rates can cure chronically high inflation.
Turkiye’s currency soon entered a freefall and the annual inflation rate touched 85 percent last year.
Erdogan has promised to continue these policies, despite predictions of economic peril from analysts.
Turkiye burned through tens of billions of dollars while trying to support the lira from politically sensitive falls ahead of the vote.
Many analysts say Turkiye must now hike interest rates or abandon its attempts to support the lira — two solutions that would incur economic pain.
“The day of reckoning for Turkiye’s economy and financial markets may now just be around the corner,” analysts at Capital Economics warned.


Miseries pile up for West Bank refugees as UNRWA workers’ strike continues

Miseries pile up for West Bank refugees as UNRWA workers’ strike continues
Updated 28 May 2023

Miseries pile up for West Bank refugees as UNRWA workers’ strike continues

Miseries pile up for West Bank refugees as UNRWA workers’ strike continues
  • Environmental and health disaster feared as piles of garbage accumulate on streets
  • The UNRWA administration requires urgent intervention to resolve the dispute with the staff and restore life to normal in the camps

RAMALLAH: Palestinian refugee camps in the West Bank face a summer littered with waste due to an ongoing strike, sparking fears about disease outbreaks.

Piles of garbage have accumulated as more than 3,600 UN Relief and Work Agency workers have been on strike since Feb. 20.

Camp residents, who number about 960,000, continue to complain about their dire living conditions, which has also affected healthcare provision and impacted the education of 50,000 students.

The UNRWA claims that it does not have enough funds to raise the salaries of its workers and meet their demands.

The lack of garbage collection, combined with the halting of healthcare services, could lead to an environmental and health disaster with summer approaching, locals fear.

Youssef Baraka, from the Jalazoun refugee camp near Ramallah, told Arab News: “The refugee always pays the bill ... and we live in difficult conditions due to the continuation of the strike.

“Our children are without education, and our patients are without treatment.”

He said that individual efforts were being made to help patients with treatment and provide medical supplies, and that residents were trying to rid camps of garbage themselves where possible.

Taysir Nasrallah, from the Balata refugee camp in Nablus, in the northern West Bank, told Arab News that Palestinian President Mahmoud Abbas had set up a committee to meet with the UNRWA Commissioner-General Philippe Lazzarini to find a quick solution to the crisis.

“The UNRWA administration requires urgent intervention to resolve the dispute with the staff and restore life to normal in the camps,” he told Arab News.

The UNRWA was set up in 1949 by the UN General Assembly to assist and protect Palestinian refugees in Jordan, Syria, Lebanon, the West Bank and the Gaza Strip.

Walid Masharqa, from the Jenin camp, said rubbish was piling up and sewage was seeping into the streets, while many basic medicines for chronic diseases are not currently available to residents.

“What is the fault of the Palestinian refugee, in the existence of wars and other humanitarian disasters in the world, for UNRWA to spoof its services to the Palestinian refugees?” Masharqa said to Arab News.

The Palestinian Authority is not allowed to provide services to refugees in the camps, he added.

Adnan Abu Hasna, a spokesman for the UNRWA in the Middle East, told Arab News that talks were continuing with the PA and the Palestine Liberation Organization to solve the strike problem.

Abu Hasna expects all parties to reach a solution soon.

He said that the UNRWA had approved an allowance of $268 for 300 of its employees in East Jerusalem due to its high prices, and employees in the West Bank were demanding the same.

But he said the UNRWA budget was unable bear the additional cost, as its funds have an annual deficit of $70 million.

Abu Hasna referred to the tremendous Saudi support for UNRWA, as it funded it for over 10 years with $1 billion, built entire cities and neighbourhoods and dozens of schools in the Gaza Strip, and saved UNRWA several times from collapse.

“King Salman personally established support for UNRWA since he was the governor of the Riyadh region and president of the Association for the Support of the Palestinian People, and the position of Saudi Arabia in strong support for UNRWA is considered a motivating factor for other countries to support UNRWA,” Abu Hasna told Arab News.

 


Iraq unveils $17bn transport project linking Europe and Mideast

Iraqi Prime Minister Mohamed Shia Al-Sudani attends a meeting with Transport Ministry representatives in Baghdad on Saturday.
Iraqi Prime Minister Mohamed Shia Al-Sudani attends a meeting with Transport Ministry representatives in Baghdad on Saturday.
Updated 27 May 2023

Iraq unveils $17bn transport project linking Europe and Mideast

Iraqi Prime Minister Mohamed Shia Al-Sudani attends a meeting with Transport Ministry representatives in Baghdad on Saturday.
  • Once completed, the $17 billion project known as the ‘Route of Development’ would span the length of the country, stretching 1,200 km from the northern border with Turkiye to the Gulf in the south

BAGHDAD: Iraq on Saturday presented an ambitious plan to turn itself into a regional transportation hub by developing its road and rail infrastructure, linking Europe with the Middle East.
Once completed, the $17 billion project known as the “Route of Development” would span the length of the country, stretching 1,200 km  from the northern border with Turkiye to the Gulf in the south.
Prime Minister Mohamed Shia Al-Sudani announced the project during a conference with Transport Ministry representatives from Iran, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Syria, Turkiye and the United Arab Emirates.
“We see this project as a pillar of a sustainable non-oil economy, a link that serves Iraq’s neighbors and the region, and a contribution to economic integration efforts,” Al-Sudani said. While further discussions are required, any country that wishes “will be able to carry out part of the project,” the Iraqi parliament’s transport committee said, adding the project could be completed in “three to five years.”
“The Route of Development will boost interdependence between the countries of the region,” Turkiye’s ambassador to Baghdad Ali Riza Guney said, without elaborating on what role his country would play in the project.
War-ravaged and beset by rampant corruption, oil-rich Iraq suffers from dilapidated infrastructure.
Its roads, riddled with potholes and poorly maintained, are in terrible condition.
Those connecting Baghdad to the north cross areas where sporadic attacks are still carried out by remnants of the Daesh group.
Al-Sudani has prioritized the reconstruction of the country’s road network, along with upgrading its failing electricity infrastructure.
Developing the road and rail corridor would allow Iraq to capitalize on its geographical position, with the aim of making the country a transportation hub for goods and people moving between the Gulf, Turkiye and Europe.
Work has already started to increase capacity at the commercial Port of Al-Faw, on the shores of the Gulf, where cargo is to be unloaded before it embarks on the new road and rail links.
The project also includes the construction of around 15 train stations along the route, including in the major cities of Basra, Baghdad and Mosul, and up to the Turkish border. The Gulf, largely bordered by Iran and Saudi Arabia, is a major shipping zone, especially for the transportation of hydrocarbons extracted by countries of the region.
Zyad Al-Hashemi, an Iraqi consultant on international transport, cast doubt on the plan to develop the country into a transportation hub, saying it lacks “fluidity.”
“Customers prefer to transport their goods directly from Asia to Europe, without going through a loading and unloading process,” that would see containers moved between ships and road or rail, he said.
Transport is a key sector in the global economy and Iraq’s announcement is the latest in other planned international megaprojects, including China’s “Belt and Road Initiative” announced in 2013 by its President Xi Jinping.
The planned works in that project would see 130 countries across Asia, Europe and Africa connected through land and sea infrastructure providing greater access to China.