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 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 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.”

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 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.”

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

The generals now know that the West has given them more or less a free hand to do as they will.

Certainly, the Brothers ruled Egypt badly. They set about consolidating their own power and neglected the economy. They were chaotic and partisan. But Islamists make up a large part of the Egyptian population. The only way they can be excluded from politics is if the security forces hold much of the power. And if that happens, Egypt will not function as a free country.

by so conspicuously holding back criticism first of the coup and now of the shooting of unarmed civilians, the West has confirmed the view of enemies of democracy everywhere: that its preaching is riddled with hypocrisy. The next time Mr Obama urges some authoritarian to embrace civil rights, he will find his case that bit harder to make