Group items tagged

In February, even before the coronavirus hit, the International Monetary Fund was warning Saudi Arabia and the United Arab Emirates that by 2034 they would be net debtors to the rest of the world. That prediction was based on a 2020 price of $55 per barrel. At a price of $30, that timeline will shorten. And even in the Gulf there are weak links. Bahrain avoids financial crisis only through the financial patronage of Saudi Arabia. Oman is in even worse shape. Its government debt is so heavily discounted that it may soon slip into the distressed debt category

The economic profile of the Gulf states is not, however, typical of most oil-producing states. Most have a much lower ratio of oil reserves to population. Many large oil exporters have large and rapidly growing populations that are hungry for consumption, social spending, subsidies, and investment

Fiscal crises caused by falling prices limit governments’ room for domestic maneuver and force painful political choices

Ecuador is the second Latin American country after Argentina to enter technical default this year.

Populous middle-income countries that depend critically on oil are uniquely vulnerable. Iran is a special case because of the punitive sanctions regime imposed by the United States. But its neighbor Iraq, with a population of 38 million and a government budget that is 90 percent dependent on oil, will struggle to keep civil servants paid.

Algeria—with a population of 44 million and an official unemployment rate of 15 percent—depends on oil and gas imports for 85 percent of its foreign exchange revenue

The oil and gas boom of the early 2000s provided the financial foundation for the subsequent pacification of Algerian society under National Liberation Front President Abdelaziz Bouteflika. Algeria’s giant military, the basic pillar of the regime, was the chief beneficiaries of this largesse, along with its Russian arms suppliers. The country’s foreign currency reserves peaked at $200 billion in 2012. Spending this windfall on assistance programs and subsidies allowed Bouteflika’s government to survive the initial wave of protests during the Arab Spring. But with oil prices trending down, this was not a sustainable long-run course. By 2018 the government’s oil stabilization fund, which once held reserves worth more than one-third of GDP, had been depleted. Given Algeria’s yawning trade deficit, the IMF expects reserves to fall below $13 billion in 2021. A strict COVID-19 lockdown is containing popular protest for now, but given that the fragile government in Algiers is now bracing for budget cuts of 30 percent, do not expect that calm to last.

Before last month’s price collapse, Angola was already spending between one fifth and one third of its export revenues on debt service. That burden is now bound to increase significantly. Ten-year Angolan bonds were this week trading at 44 cents on the dollar. Having been downgraded to a lowly CCC+, it is now widely considered to be at imminent risk of default. Because servicing its debts requires a share of public spending six times larger than that which Angola spends on the health of its citizens, the case for doing so in the face of the COVID-19 crisis is unarguable.

Faced with the price collapse of 2020, Finance Minister Zainab Ahmed has declared that Nigeria is now in “crisis.” In March, the rating agency Standard & Poor’s lowered Nigeria’s sovereign debt rating to B-. This will raise the cost of borrowing and slow economic growth in a country in which more than 86 million people, 47 percent of the population, live in extreme poverty—the largest number in the world. Furthermore, with 65 percent of government revenues devoted to servicing existing debt, the government may have to resort to printing money to pay civil servants, further spurring an already high inflation rate caused by food supply shortages

The price surge of the 1970s and the nationalization of the Middle East oil industry announced the definitive end of the imperial era. The 1980s saw the creation of a market-based global energy economy. The early 2000s seemed to open the door on a new age of state capitalism, in which China was the main driver of demand and titans like Saudi Aramco and Rosneft managed supply

The giants such as Saudi Arabia and Russia will exploit their muscle to survive the crisis. But the same cannot so easily be said for the weaker producers. For states such as Iraq, Algeria, and Angola, the threat is nothing short of existential.

Beijing has so far shown little interest in exploiting the crisis for debt-book diplomacy. It has signaled its willingness to cooperate with the other members of the G-20 in supporting a debt moratorium.

In a century that will be marked by climate change, how useful is it to restore profits and prosperity based on fossil fuel extraction?

The shock of the coronavirus is offering a glimpse of the future and it is harsh. The COVID-19 crisis drives home that high-cost producers are on a dangerously unsustainable path that can’t be resolved by states propping up their uncompetitive oil sectors. Even more important is the need to diversify the economies of the truly vulnerable producers in the Middle East, North Africa, sub-Saharan Africa, and Latin America.

The new IMF program requires 20 million vulnerable Egyptians to receive cash transfers by the end of January, but three years ago when things were far less precarious, there were already 30 million Egyptians in poverty and the World Bank estimated 60 million Egyptians were near or below the poverty line. Today, poverty levels are almost certainly higher and despite a modest increase in social protection coverage, domestic demand in the coming year will likely weaken even further

the IMF appears unrealistic about the coming pain, estimating just 14 percent inflation in the coming year. They are also likely to be unrealistic about how quickly growth can be achieved. It is not just the private sector that will not grow in the near term due to the many deterrents facing Egypt’s business community. 

Egypt’s GDP growth for the past several years was buoyed by enormous levels of public spending on roads, bridges, new cities (including a new capital city), massive rail projects including the world’s longest monorail line, and even a number of presidential palaces.  Now that the state is being required by the IMF to cut unnecessary large project stimulus and its ability to borrow is heavily constricted, the country’s growth model is at risk of decelerating.

The IMF has finally started to seriously engage with Egypt’s sizable governance issues and calls for reducing the size of the military’s economic empire which has done enormous damage to the country’s economy and private sector

It is an anomaly of the Tunisian political scene that the UGTT’s anti-austerity position has little representation among elected politicians: the largest political groups (the Islamist Ennahda party and various offshoots of the secular-modernist Nidaa Tounes party) have backed the IMF agreement

unemployment and the proliferation of grey-sector jobs are linked to structural biases in the economy that systematically favour a small group of politically connected businesses. Measures that might address this problem include increasing access to credit for would-be entrepreneurs, changing regulations and practices within the public and banking sectors that are tilted to a narrow elite, and reducing corruption. According to Tunisians, corruption has not been reduced but only “democratised” since the revolution. Investment in infrastructure serving disadvantaged parts of the country could also help spur more inclusive growth

Since the revolution, the overarching priority of political life in Tunisia has been to seek enough stability to preserve and complete the political transition. Much has been achieved, though a few important steps (notably the establishment of a Constitutional Court) remain unfulfilled. But Tunisia has now reached a point where the greatest threat to stability is no longer political rivalries around religious identity but unmet social and economic aspirations. Until now, the country’s political parties have not organised themselves to offer distinctive and coherent visions of how Tunisia’s socio-economic development can be improved, and they are paying the price in public alienation from the entire political system

Talks on the IMF 48-month arrangement have been in limbo after Saied rejected terms including cutting subsidies and reducing the public wage bill, saying the "diktats" laid down by the international lender were unacceptable.

has to pay back a 500 million euro bond maturing in October and an 850 million euro note due in February

"rising reserves and marginal fiscal consolidation have granted Tunisia some additional runway" thanks to a pickup in tourism

Tunisia also received $500 million of fresh funding from Saudi Arabia in July. A $1 billion European Union pledge of support is, however, conditional on Tunisia receiving an IMF programme.

The World Bank recently cut its Tunisian economic growth forecast to 1.2% from 2.3% for 2023 citing "very uncertain prospects" over debt financing and difficult conditions following a three-year drought that has pushed the government to raise tap water prices and threatened food security.

Tunisia can nevertheless count on support from some other nations under pressure thanks to its geopolitical and geographic importance, according to analysts.Italian Prime Minister Giorgia Meloni maintains a close relationship with Tunisia. Record numbers of migrants setting off from the country have landed on Italy's far southern island of Lampedusa."Meloni is a staunch supporter of Tunisia because of the migration issue and that gives them more space to delay things,"

Public taxation is also increasing. A sin tax was implemented in June 2019 on products like sugary carbonated drinks and tobacco, and a serially delayed 5% value-added tax is expected in 2021. According to Salmi, electricity and water subsidies could soon be slashed and, in the long term, Omanis could see an income tax.

Above all, reforming the labor market — an unpopular move — would be the cornerstone of a post-Qaboos welfare state. About 43% of Omanis work for public entities. Abousleiman recommended economic diversification to foster private sector job creation and to further "relieve the expectations on the government to provide employment."

Following a field visit to Oman in 2019, the International Monetary Fund (IMF) suggested that the wages and benefits of the private sector need to align more closely with the public sector to make employment in the former more appealing.

Omanis who talked to Al-Monitor, as well as Mukhaini, believe any upcoming austerity measures "should not make the poor poorer and the rich richer," Mukhaini said.

According to rating firm S&P, the new ruler will face “a difficult trade-off” in the coming months to address high unemployment among youths, weak growth, and fiscal and funding pressures

Defense and security expenses account for over a quarter of Oman's annual budge

Oman — rated junk by the three major rating agencies — has several other options to fund its short-term ballooning deficit: Go further into debt; deplete its sovereign wealth fund; sell state assets; devalue its currency; and seek assistance from neighboring countries or international organizations.

Analysts believe Oman should build a model of governance tailored to the post-oil era. Along with a more stringent budget environment, the new leadership pledged to implement structural reforms to diversify the rentier economy and foster private sector-led growth.

To ensure political and social stability, Sultan Qaboos avoided controversial measures that could have triggered short-term political unrest

In 2011, at the height of the Arab uprisings, Sultan Qaboos promised to create 50,000 jobs and institute unemployment benefits in an attempt to defuse unprecedented nationwide protests.

the lack of economic reforms did not stop Omanis from loving the monarch, who built a modern state out of a medieval-like society he inherited in the early 1970s

Sultan Haitham bin Tariq "is already planting the seeds by cutting the royal expenditures tremendously,"

The relationship between state and society that Omanis have known for decades will likely never be the same

As a structured political party with large parliamentary representation but little influence inside state institutions, Ennahda in particular has aimed to change the status quo, as its new elite within the Tunisian interior remains largely excluded from the established economic circles in the coastal cities.

seek the political backing of the IMF and G7 countries, who are demanding that Tunisia speed up ongoing structural reforms to the economy. However, these measures are very unpopular, reawakening old grievances and notably sparking widespread anti-austerity protests in January 2018

The discourse of the union’s leadership—which calls for nationalization of major sectors and includes elements of pan-Arabism and anti-imperialist nationalism—is finding appeal among a population disenchanted with the leading parties’ ability to improve their economic situation. The union has also found natural partners in the Popular Front, a political coalition of leftists and pan-Arabists, and in remnants of the old regime, whose hybrid ideology incorporates nationalism, socialism, and pan-Arabism

as UGTT leaders accuse Chahed and Ennahda of being manipulated by the IMF and foreign countries, the camp in power is going on the defensive. They have alternately called for negotiations, stalemate, and compromise with the UGTT, ultimately capitulating to the UGTT’s primary demand on February 7 to increase wages in order to avert the planned February 20 strike

The more Tunisia’s foreign partners demand substantial structural reforms, the more the current coalition will confront popular anger that puts these reforms on hold, lest the coalition provoke a larger upheaval that could topple it. This will in turn make it harder for the government to abide by Tunisia’s commitments to its international donors, at a time when it needs their support to keep a grip on power

former officers occupy key government positions in charge of running the national economy

The IMF loan agreement failed to fully account for the military’s domination of the economy and the state bureaucracy

the military positioned itself as the savior of a crisis of its own creation and further squeezed its private sector competitors. Alexandria’s military governor pledged to end the sugar crisis, blaming it on greedy private merchants. Meanwhile, the Defense Ministry’s “al-Salam Company to Sell the Armed Forces’ Products” sold 3,000 tons of affordable sugar in poor neighborhoods of the city. Sugar eventually resurfaced on the market — after the military minister of supply doubled its price.

Although seeking to shrink the bureaucracy, the regime enhanced its ability to place loyalists in key positions. One article in the new legislation retained a rule from the Hosni Mubarak era by reserving the authority to appoint officials in leadership positions to the president. Sisi has energetically exploited these powers, placing an increasing number of fellow former officers in top civilian jobs in the government and the public sector as soon as they retire

In the past three years, Egypt’s president issued six decisions to raise military pensions by a total of 35 percent. Furthermore, the parliament supported a new fund to provide medical and social services to military judges

These cascading crises called for urgent poverty-alleviation efforts. The military stepped in with mega-construction projects that the government’s propaganda machine portrayed as designed to lift up the lower classes — social housing for inhabitants of slums and reclamation of new land for distribution to lower-class youths. Military contractors took charge of executing these over-ambitious projects, while the army’s Department of Morale Affairs made uplifting videos on their progress.

although the project was advertised as an initiative to support the rural poor, the reality on the ground was far different. Army soldiers confiscated the desert land of numerous farmers in Qina, a poor province in southern Egypt, which they had reclaimed and cultivated for decades. The army accused the farmers of encroachment on state property and evicted them in order to annex their land to the project. Qina’s governor, a former general, used heavy loaders to demolish farmers’ properties on 100,000 acres. Helpless civilian owners could only send complaints about the governor to Cairo’s General Authority for Agricultural Development Projects, then chaired by yet another fellow former general.

Cutting public expenditures on basic goods, for instance, didn’t stop the military from lavish spending on arms procurement. From France alone, it struck deals worth over $2 billion last March. The Defense Ministry didn’t pay for those arms from the accumulated revenue of its commercial activities, but rather took loans from French banks. The military usually insists that its lucrative commercial enterprises are aimed at securing its self-sufficiency in goods and weapons, but in this case the army didn’t pay for its large shipment from its own accounts. Rather, it asked the civilian Finance Ministry to guarantee the large loan and foot the bill if the army defaults

The decision to implement the new system was quickly reversed, however, over fears that the simmering bread crisis could provoke wider tumult. Seeking to allay citizens’ concerns that the move was a prelude to a reduction in their quotas of subsidized bread, Moselhy held a televised press conference on the day of the protests, apologizing to “all citizens who had not received bread” and asserting that their quotas would remain untouched. Promising to resolve the crisis within 48 hours, he blamed bakery owners for the crisis, hinting they were making profits off the subsidized flour they received from the government.

In the last six years, government spending on food and fuel subsidies has represented more than a quarter of annual government expenditure (more than the country spends on education and health services combined)

a thriving black market for the subsidized wheat, which is often resold by the bakeries at a profit rather than turned into bread

“The patience of Egyptians is wearing thin,” Cairo University political scientist Hassan Nafaa told Al-Monitor. “Despite the economic pressures they are facing, citizens have so far restrained themselves from protesting because they are weary after two revolutions. They also fear further turmoil as they see the civil wars in some of the neighboring Arab countries. But if people are hungry and if their basic needs are not met, there is likely to be another rebellion,” he warned, adding that if that happens, “It would be messy and bloody.”

Tensions have been simmering since the pound’s depreciation — a key requirement by the International Monetary Fund for Egypt to secure a $12 billion loan needed to finance the country’s budget deficit and shore up dwindling foreign currency reserves. Economists and analysts have lauded the flotation as “a much-needed reform that would restore investors’ confidence in the economy, helping foster growth and job creation.”

shrinking middle class was already struggling with flat wages, high inflation and mounting unemployment

Sisi’s approval ratings, which according to a poll conducted in mid-December 2016 by Baseera (Egyptian Center for Public Opinion Research) fell by 50% during his second year in office

the weak currency is helping the economy by boosting exports and luring back tourists. A 25% increase in non-petroleum exports in January (compared with the same month last year), along with new loans from the IMF and other sources, is beefing up foreign currency reserves, according to The Economist. The weaker currency is also proving to be a blessing in disguise for local manufacturers as more consumers are opting to purchase local products, which are more affordable than their imported alternatives

The real test will be the government’s ability to stave off unrest that could undermine the progress made so far. Nafaa said it is possible to quell the rising anger over soaring prices “through more equitable distribution of wealth, better communication of government policies, transparency and accountability.”

“The government must also ease the crackdown on dissent, release detainees who have not committed terror crimes and bring more youths on board,”

While we may not know exactly how much Arab regimes spend on their militaries, we do know that they are among the world’s leading importers of arms—an industry rife with corruption—and the largest recipients of military aid. As SIPRI has documented, six of the top 10 importers of major arms were Arab countries, totaling nearly one-third of all global imports ($146 billion) between 2015 and 2019. In 2017—the last year for which full data are available—four of the top 10 purchasers of U.S. arms were Arab countries, and nearly one-third of all U.S. weapons sales ($36.6 billion), along with roughly $5 billion in U.S. security aid, went to Arab regimes.

When IFIs provide assistance, even emergency aid, to Arab governments, they should condition the funds on transparent budgets, including a full accounting of military expenditures

Malek said his organization was also trying to broker a solution to Cairo's debt to foreign energy companies producing oil and gas in Egypt such as BP, Gas Natural, Petronas, Shell and Dana, that has accumulated since the 2011 uprising.He disputed the figure of $9 billion cited by consultancy Executive Analysis and European diplomats for the total energy debt, saying it was far less, but declined to give a number."Some of their contracts needed to be reviewed because they were not balanced to cover both the national interest and the company interest. So some licenses were suspended when they expired, which made a bit of a problem," Malek said."We tried to encourage them by giving them more concessions and rescheduling these payments (owed by Egypt). We opened other opportunities in the same field such as refineries and other projects they can take. Up to this moment, none of these companies has decided to leave," Malek said.He acknowledged that most foreign energy companies were still holding back on new investments in Egypt. "They want to see these problems tackled first. They want to see a clear road map, which is normal in such an environment."

The temptation to draw the comparison has some substance. In 2011, demonstrators explicitly demanded the end of regimes ruling over their respective countries, and the same is happening today.Moreover, both in 2011 and 2018-19, the protesters seem to be emboldened by the ongoing movements in other countries. Stephen McInerney, the executive director for the Project of Middle East Democracy (POMED), explained that “certainly what happens in one Arab country is seen elsewhere, and there are common frustrations shared across the region.”

It’s natural that boiling tensions inside countries and ongoing protests are giving way to the overarching claim that a new Arab Spring is underway. But that simplistic framing misunderstands the nature of political grievances and upheavals in the region. After all, they are similar to the protests in 2011, just as the 2011 protests are similar to those that happened in the decades before, and will be similar to those that happen in the future.

A ‘Spring’ implies in its history and usage, the new flowering of a spontaneous, overwhelming grassroots revolution that permanently changes the sociopolitical landscape of the countries and even the region. It paints a picture of a people awakened to the oppression they face and marching through the streets to demand justice.

But Arabs have been ‘awake’ to the corruption, misuse and abuse regimes have enacted upon them for decades, and have organized against it accordingly.

the same protests and chants that can be heard in Jordan and Sudan were yelled in the beginning of 2018. At both times and in both countries, the government cut bread and fuel subsidies in order to comply with loan conditions set by the International Monetary Fund (IMF).Egypt in 2017 also saw thousands take to Twitter and the streets to protest against similarly price hikes in bread following a government removal of subsidies, though the IMF continually insists it did not recommend these governments cut subsidies servicing poor and working class families.

To look at these continual mobilizations and isolate the movements happening now as an “Arab Spring 2.0” ignores the continual, inter-generational struggle for economic and political rights that has pushed continuously at the doors of old regimes. In their place, an alternate history is given whereby Arabs were resting, and were woken up.

“In Algeria, Jordan, and Sudan the regimes managed to dodge the original 2011 wave. The confrontation was avoided but popular discontent was not crushed, and the reasons for it not addressed. So this will continue to come back, until either a showdown happens or things change.”

It is less an ‘Arab Spring 2.0’ than a continuation of 2011’s protests, which were in themselves continuations of protests that occurred in the years before.

Ending practices of corruption and cronyism requires movements that aren’t framed as spontaneous ‘Springs’ of youth but as constituent parts of a broad-based, durable intergenerational call for justice from below. 

In 2016, the military and other security institutions were given exemptions in a new value-added tax (VAT) law enacted as part of IMF-inspired reforms. The law states that the military does not have to pay VAT on goods, equipment, machinery, services and raw materials needed for the purposes of armament, defense and national security.The Ministry of Defense has the right to decide which goods and services qualify. Civilian businessmen complain that this can leave the system open to abuse. Receipts for a cup of coffee at private sector hotels, for example, add 14 percent VAT. Receipts at military hotels do not. Employees at the military-owned Al-Masah Hotel in Cairo told Reuters that no VAT was charged when renting venues for weddings and conferences.

The Ministry of Military Production is projecting that operating revenues from its 20 firms will reach 15 billion Egyptian pounds in 2018/2019, five times higher than in 2013/2014, according to a ministry chart. The ministry does not disclose what happens to the revenues. The chairmen of two of the firms said profits go to the ministry or are reinvested in the business.

“I don’t want to be a local shop. I want to be a company that has the capacity to export and compete internationally.”

The chairmen of two military engineering companies, Abu Zaabal Engineering Industries Co and Helwan Engineering Industries Co, said in recent years it had become much easier to access financing through the Ministry of Military Production.

Military companies receive an exemption from import tariffs under a 1986 law and from income taxes under a 2005 law. Cargoes sent to military companies do not have to be inspected.

The Ministry of Military Production signed a memorandum of understanding with China’s GCL Group last week to build a solar panel factory worth up to $2 billion. The military has taken over much of the construction of intercity roads from the Ministry of Transport and now controls the toll stations along most major highways.

Economists and investors say reforms tied to a $12 billion three-year IMF program signed in Nov. 2016 should lay the ground for economic expansion. But foreign investors are still shying away from Egypt, apart from those focusing on the more resilient energy sector. Non-oil foreign direct investment fell to about $3 billion in 2017 from $4.7 billion in 2016, according to Reuters calculations based on central bank statistics.  

foreign investors were reluctant to invest in sectors where the military is expanding or in one they might enter, worried that competing against the military with its special privileges could expose their investment to risk. If an investor had a business dispute with the military, the commercial officer said, there was no point in taking it to arbitration. “You just leave the country,” he said.

Egypt’s military, the biggest in the Arab world, has advantages.It enjoys financial support from Saudi Arabia and the United Arab Emirates, staunch supporters of Sisi since he toppled the group they see as a threat to the Middle East, the Muslim Brotherhood. Western powers see Cairo as a bulwark against Islamist militancy. Egypt receives $1.3 billion in military aid annually from the United States alone.

In 2015, the defense minister issued a decree exempting nearly 600 hotels, resorts and other properties owned by the military from real estate taxes

Among projects the Ministry of Military Production announced in 2017 was a plan to plant 20 million palm trees with an Emirati company and build a factory to make sugar from their dates. It agreed with a Saudi company to jointly manufacture elevators. The military inaugurated the Middle East’s biggest fish farm on the Nile Delta east of Alexandria.

At bustling Cairo squares, people line up to buy subsidized meat and other food handed out from trucks sponsored by the military. Sisi said he had instructed the military to enter the market “to supply more chicken to push down prices.”Some disagree with such measures on the grounds the military’s mission is to protect the country from external threats.“We have reached a point where they are competing even with street vendors,”

when he talks he talks the language of the street and the street listens to him. That's Sisi's problem.  

Most Egyptians have seen their real incomes fall, while Egypt under its IMF-backed austerity programme is racking up huge foreign debts. It was $43bn during Morsi’s presidency. It is $106bn now. Seventy per cent of taxes now goes into paying these debts off. Internal debt is over 5 trillion Egyptian pounds ($306bn).

Ali listed them: a luxury house in Hilmiya ($6m), a presidential residence in Alexandria ($15m), a palace in the new administrative capital, and another one in the new Alamein city west of Alexandria.

A report published by the World Bank in April calculated that "some 60 percent of Egypt’s population is either poor or vulnerable". 

Sisi  was a "failed man", a "disgrace", a "midget" who uses make up and hitches his trousers up too high, Ali told Egypt. Sisi was a con man who lectured you on the need to tighten your belt while building palaces for his wife Intissar.

"Now you say we are very poor, we must be hungry. Do you get hungry? You spend billions that are spilt on the ground. Your men squander millions. I am not telling a secret. You are a bunch of thieves."

Every Egyptian remembers the lectures Sisi gave them on the need to tighten their belts. When the IMF forced the state to reduce subsidies, Sisi’s response was: "I know that the Egyptian people can endure more... We must do it. And you’ll have to pay; you’ll have to pay," Sisi said in one unscripted rant a year into his presidency.

Ali’s YouTube channel has done more in three weeks to destroy Sisi’s image than the Brotherhood, liberals and leftists, now all crushed as active political forces in Egypt, have done in six years of political protest. 

To their credit the opposition did not crumble, paying for their stand with their lives and their freedom. To their shame the Egyptian people did not listen.

Sisi thinks he can ride this out, as he has done challenges in the past. Hundreds of protesters have been arrested since last Friday.

The initial demonstration in Tahrir Square in January 2011 was smaller than the ones that broke out in Cairo, Suez and Alexandria last Friday. They called for reform, not the overthrow of Hosni Mubarak. Last Friday, Sisi’s portrait was torn down. “Say it, don’t be afraid, Sisi has to leave!” they shouted on day one of this fresh revolt. 

the "opposition" is everybody - ordinary Egyptians, disaffected junior ranks in the army, Mubarak era businessmen. This is a wide coalition of forces. Once again Egypt has been reunited by a tyrant

unlike 2013, Sisi’s bankers  - Saudi Arabia and the UAE - have run out of cash for Egypt. Today each has its own problems and foreign interventions which are all turning sour - Yemen and Libya.

The steam is running out of the counter-revolution.

popular protest is re-emerging as a driver for change across the region. We have seen it topple dictators in Sudan and Algeria. Both have learned the lessons of failed coups in the past and have so far managed the transition without surrendering the fruits of revolution to the army. This, too, has an effect on events in Egypt.

a coalition of trade unions called the Sudanese Professionals Association (SPA) established informal leadership of nationwide demonstrations

In February 2020, the International Monetary Fund (IMF) described Sudan’s economic prospects as “alarming” – unusually blunt language by its standards. Then came covid-19 and the associated global economic downturn. The IMF revised its assessment: Sudan’s GDP would shrink by 7.2 percent in 2020. By April, inflation had risen to almost 100 percent (one independent estimate finds that inflation may have hit around 116 percent). Adding to this grim catalogue of calamities, the swarms of locusts that have ravaged the Horn of Africa in the worst outbreak in 70 years are widely expected to arrive in Sudan in mid-June. The United States Agency for International Development estimates that more than 9 million Sudanese will require humanitarian assistance this year.

Despite the fact that a “constitutional declaration” places the civilian-dominated cabinet in charge of the country, the generals are largely calling the shots. They control the means of coercion and a tentacular network of parastatal companies, which capture much of Sudan’s wealth and consolidate their power at the expense of their civilian partners in government

In particular, Hamdok will need to establish civilian authority over the parastatal companies controlled by the military and security sector. The task is daunting and fraught with risks, but Hamdok can acquire greater control by taking advantage of the rivalry between Hemedti and General Abdelfattah al-Buhran, the de facto head of state.

draws on 54 recent interviews with senior Sudanese politicians, cabinet advisers, party officials, journalists, former military officers, activists, and representatives of armed groups, as well as foreign diplomats, researchers, analysts, and officials from international institutions

Sudan’s chance for democratisation is the product of a difficult struggle against authoritarianism. For three decades, Bashir ruled as the president of a brutal government. He took power in 1989 as the military figurehead of a coup secretly planned by elements of the Sudanese Muslim Brotherhood, before pushing aside Islamist ideologue Hassan al-Turabi, who had masterminded the plot. During his rule, Bashir survived US sanctions, isolation from the West, several insurgencies, the secession of South Sudan, a series of economic crises, and arrest warrants from the International Criminal Court for war crimes, crimes against humanity, and genocide in Darfur. He presided over ruthless counter-insurgency campaigns that deepened political rifts and destroyed the social fabric of peripheral regions such as Darfur, South Kordofan, and Blue Nile.

he turned pro-government tribal militias from Darfur into the Rapid Support Forces (RSF), an organisation led by Hemedti, as insurance

Throughout the 2010s, the Bashir regime put down successive waves of protests. But the uprising that began on December 2018 – triggered by Bashir’s decision to lift subsidies on bread – proved too much for the government to contain

The April 2019 revolution, which ended Omar al-Bashir’s 30-year military rule, brought hope that a civilian regime would emerge to govern Sudan. But – less than a year since the appointment of the transitional prime minister, Abdalla Hamdok – this hope is fading fast.

As junior officers vowed to protect demonstrators, the leaders of the military, the RSF, and the NISS put their mistrust of one another aside, overthrew Bashir, and installed a junta

On 3 June, the last day of Ramadan, the generals sent troops to crush the sit-in. RSF militiamen and policemen beat, raped, stabbed, and shot protesters, before throwing the bodies of many of their victims into the Nile. Around 120 people are thought to have been killed and approximately 900 wounded in the massacre.

prompted Washington and London to pressure Abu Dhabi and Riyadh to curb the abuses of their client junta

envisioned a transition that would – over the course of a little more than three years, and under the guidance of a civilian-led cabinet of ministers – reach a peace deal with armed groups from the peripheral regions of Sudan, while establishing a new constitutional order and free elections

When Hamdok, a UN economist picked by the FFC, took office on 21 August, there were grounds for cautious optimism. The peace talks with armed groups began in earnest and seemed to make rapid progress. Hamdok inherited a catastrophic economic situation and political structure in which the generals remained in high office but the constitutional declaration put civilians in the driving seat. Western countries expressed their full support for the transition. The journey would be difficult, but its direction was clear.

Sudanese citizens have gained new civil and political rights since the transition began. The new authorities have curtailed censorship. The harassment and arbitrary, often violent detentions conducted by NISS officers have largely ended. Minorities such as Christians now have freedom of religion. The government has repealed the public order law, which allowed for public floggings. And it is in the process of criminalising female genital mutilation.

The authorities have not achieved much on transitional justice.[3] The head of the commission in charge of investigating the 3 June massacre of revolutionary demonstrators said he could not protect witnesses. The authorities said they are willing to cooperate with the International Criminal Court to try Bashir and the other wanted leaders, but the generals are blocking a handover of the suspects to The Hague

By 2018, the authorities were struggling to finance imports, and queues were forming outside petrol stations. The economic slide continued, prompting Bashir’s downfall. It has only continued since then. The Sudanese pound, which traded at 89 to the dollar in the last weeks of Bashir’s rule, now trades at 147 to the dollar.

Donors want the Sudanese government to commit to reforms that will have a social cost in return for a promise of unspecified levels of funding. The pledges Sudan receives in June could fall far below the estimated $1.9 billion the government needs, forcing the authorities to create the social safety net only gradually.[8] This would go against the logic of a temporary programme designed to offset one-off price hikes. In these conditions, subsidy reform – however necessary – is a gamble for the government.

The European Union has pledged €250m in new development assistance (along with €80m in support against covid-19) to Sudan, while Sweden has pledged €160m, Germany €80m, and France €16m-17m. Yet these are paltry figures in comparison to Europeans’ declared commitments

The path to debt relief under the Heavily Indebted Poor Country (HPIC) Initiative is long in any circumstances. But US indifference, European timidity, and the indecisiveness of Hamdok’s cabinet have combined to kill off hopes that the diplomatic momentum Sudan established in September and October 2019 would quickly translate into substantial international assistance

Although the state sponsor of terrorism designation does not impose formal sanctions on Sudan, it sends a political signal that stigmatises the country, deters foreign investment and debt relief, and casts doubt on Washington’s claim to support civilian government. Unfortunately for Hamdok, Sudan does not sit high on the list of priorities of the current US administration. President Donald Trump decided not to fast-track Sudan’s removal from the list of state sponsors of terrorism, allowing the process to take the bureaucratic route and become enmeshed in the conflicting perspectives of the State Department, national security and defence agencies, and Congress

Failure to stabilise Sudan’s economy would have far-reaching consequences for not only the country but also the wider region. Since Hamdok’s appointment, the domestic balance of power has once again tilted in favour of the generals, who could seize on the climate of crisis to restore military rule. If they remove civilian leaders from the equation, rival factions within the military and security apparatus will be set on a collision course.

Within the government, the configuration of power that has emerged since September 2019 bears little resemblance to the delicate institutional balance – enshrined in the constitutional declaration – that the FFC fought so hard to achieve in its negotiations with the junta.

The generals’ public relations machine is now well-oiled. The military opened a bakery in Atbara, the cradle of the 2018-2019 uprising. Hemedti has established health clinics and a fund to support farmers; his forces have distributed RSF-branded food supplies and launched a mosquito-eradication campaign.

Neither Hamdok nor the FFC has attempted to mobilise public support when faced with obstruction by, or resistance from, the generals. As such, they have given up one of the few cards they held and created the impression that they have been co-opted by the old regime. The popularity of the FFC has collapsed; Hamdok earned considerable goodwill with the Sudanese public in late 2019, but their patience with him is wearing thin. Many activists say that they would be back on the streets if it were not for covid-19 (which has so far had a limited health impact on Sudan but, as elsewhere, led to restrictions on public gatherings).

The so-called “Arab troika” of the UAE, Saudi Arabia, and Egypt have taken advantage of the revolution to sideline their regional rivals Turkey and Qatar, which had long supported Bashir’s regime. The Emiratis, in cooperation with the Saudis, are playing a particularly active role in shaping Sudan’s political process, reportedly spending lavishly and manoeuvring to position Hemedti as the most powerful man in the new Sudan

The Emiratis are widely known to be generous with their covert financial contributions, which flow either directly to various political actors or, indirectly, through Hemedti.[20] Mohammed Dahlan, the Palestinian exile who runs many important security projects on behalf of Emirati ruler Mohammed bin Zayed, handles the UAE’s Sudan file.[21] Former Sudanese general Abdelghaffar al-Sharif, once widely considered the most powerful man in the NISS, reportedly lives in Abu Dhabi and has put his formidable intelligence network at the service of the UAE.

The Arab troika has also worked to undermine Hamdok and prop up the generals

Saudi Arabia and the UAE have avoided financing transparent mechanisms such as the World Bank’s Multi-Donor Trust Fund. Meanwhile, Hemedti appears to have a large supply of cash with which to support the central bank. In March, he deposited $170m in the bank. These developments suggest that the Gulf powers could be using their financial might to shape the outcome of Sudan’s domestic political process, redirecting flows of money to prop up Hemedti and exacerbating the economic crisis to position him as a saviour

The levels of resentment between the RSF and SAF are such that many officers fear a local incident could escalate into broader clashes between the two forces

Beyond subsidies, the economic debate in Sudan has recently turned to the issue of how the civilian authorities can acquire greater revenue – particularly by recovering assets stolen by the Bashir regime, and by gaining control of the sprawling network of parastatal companies affiliated with the military and security sector.

It is not difficult to identify who to tax: companies owned by NCP businessmen, Bashir’s family, the SAF, the NISS, and the RSF play a dominant role in the economy, yet benefit from generous tariff and tax exemptions

the military and security apparatus has shares in, or owns, companies involved in the production and export of gold, oil, gum arabic, sesame, and weapons; the import of fuel, wheat, and cars; telecommunications; banking; water distribution; contracting; construction; real estate development; aviation; trucking; limousine services; and the management of tourist parks and events venues. Defence companies manufacture air conditioners, water pipes, pharmaceuticals, cleaning products, and textiles. They operate marble quarries, leather tanneries, and slaughterhouses. Even the firm that produces Sudan’s banknotes is under the control of the security sector.

These companies are shrouded in secrecy; high-level corruption and conflicts of interest make the boundaries between private and public funds porous

The generals are using dark money to keep the civilian government on life support, ensuring that it remains dependent on them

Following decades of consolidated authoritarianism, Sudan has entered a rare period of instability in its balance of power.

The US, Europe, and international financial institutions have left Sudan to its own devices, allowing its economy to tank and its political transition to stall. In the interim, the generals have expanded their reach and FFC leaders have returned to Sudan’s traditional elite bargaining, at the expense of institutional reform. Western inaction has also enabled regional actors – chief among them Abu Dhabi and Riyadh – to play a prominent role in Sudan, dragging the country closer to military rule or a civil war.

Across the region, Saudi Arabia and the UAE have demonstrated their preference for military governments over civilian-led democracies. Their recent actions in Sudan suggest that they may hope to repeat their success in helping return the military to power in Egypt in 2013. But this would be both cynical and naïve. A strong civilian component in the government is a prerequisite for stability in Sudan. The country’s conflicts are a direct result of state weakness – a weakness that pushed Bashir’s military government to use undisciplined militias to repress citizens, fuelling cycles of instability and the emergence of a fragmented military and security apparatus. In the current political environment, any attempt to formally impose military rule could ignite further instability and even a civil war.

Saied shows no sign of willingness to compromise with his political opponents. Instead, relying on the support of the Ministry of Interior and its security forces, he seems to be adopting a repressive response

The EU and its member states can encourage Tunisia to return to its democratic path by making clear that they will only endorse a dialogue as legitimate if all mainstream political forces participate in it, and that the country needs to hold an election before revising the constitution. (The constitution Tunisia adopted in 2014 requires a two-thirds parliamentary majority to endorse any proposed amendments.) Europeans should also make clear that they would see attempts to prosecute MPs for conspiring against state security as a serious violation of the rule of law.

So far, EU officials have been reluctant to condition cooperation with Tunisia on a return to democratic standards. The European Commission recently announced that it would loan the Tunisian government €450 million to support its budget. A loss of European financial assistance would worsen Tunisians’ living conditions, which are already difficult.

Cairo was forced to go to the IMF last year after foreign investors withdrew about $20bn from Egypt’s debt markets around the time of Russia’s invasion of Ukraine. The capital outflow triggered a foreign currency crisis and forced Cairo to turn to Gulf states for a multibillion-dollar bailout.

Egypt had been paying the world’s highest real interest rate to attract the portfolio inflows it used to finance its current account deficit.

the weak pound has added to inflationary pressures. Core inflation rose to 24.4 per cent in December