Tunisia must break free from reliance on short-term economic fixes

The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

Tunis’ political decision to mobilise resources for escalating expenditures without addressing the need to curb spending, downsize the government, and reduce the state’s economic footprint is a looming disaster, Sadok Rouai writes.

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Tunisian President Kaïs Saïed recently declared that central bank autonomy should not equate to independence from the state. 

Saïed insisted that autonomy applies to monetary policy but not the financing of the state budget. This comes in the wake of the recent postponement of the IMF mission to discuss the monetary fund’s deal for Tunisia.

President’s declaration against the Central Bank’s autonomy has marked the apex of a series of assaults on its sovereignty, aimed at overturning Article 25 of its current statute which prohibits direct financing of the state budget. 

The bank’s governor, Marouane El Abassi, had previously warned that central bank financing of the budget would spike inflation uncontrollably and replicate the Venezuelan scenario in the country.

But what motives underlie Saïed’s unsettling efforts to overturn Article 25?

Populist rejection to consolidate one-man rule

More than a year has passed since Tunisia inked a $1.9 billion (€1.73bn) preliminary agreement with the IMF, led by then-Head of Government Najla Bouden’s economic team on 15 October 2022. 

The agreement targeted financial imbalances through measures like cutting untargeted subsidies, trimming the public sector wage bill, and reforming loss-making public enterprises.

Saïed’s populist rejection of the IMF deal, citing it as a tool of Western imperialism, follows his moves to consolidate one-man rule since September 2021. 

Governing Tunisia unilaterally through decrees, bypassing the constitution, and suppressing critics, Saïed has overseen a worsening economic crisis marked by growing poverty, essential item shortages, and soaring prices. 

He considers that implementing IMF reforms could trigger protests, posing a challenge to his political control.

The commitment to implement crucial reforms for the finalisation of the IMF deal has therefore been long delayed. 

This resistance escalated further with Saïed’s recent sacking of the minister of economy and planning, who had spearheaded the IMF negotiations and remained committed to the implementation of the agreed reforms.

A quick fix won’t do

In the interim, faced with limited access to foreign financing, the authorities have heavily leaned on local funding, particularly from the banking system. 

They accumulated arrears with both foreign and local suppliers. Tunisia thus experienced a significant decline in imports and distribution of subsidized commodities, leading to frequent shortages.

Local banks face a capacity limit to finance the state budget, prompting calls to push the Central Bank to do so. This is a red alert — Tunisia must break free from reliance on short-term fixes at this perilous juncture.

Bilateral donors must vigorously support systemic economic reforms and Central Bank sovereignty within an IMF deal. There’s no alternative path for Tunisia’s economic future.

Advocates proposing amendments to the Central Bank’s statute argue that reintroducing direct budget financing if within legal limits, would be sustainable and minimally impact inflation. 

They contend that such financing would eliminate intermediation costs imposed by the banking system. 

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However, this perspective overlooks the risk of potential abuses and misuse of the law, offering a convenient yet temporary solution for the government. 

The political decision to mobilise resources for escalating expenditures without addressing the need to curb spending, downsize the government, and reduce the state’s economic footprint is a looming disaster.

History does repeat itself

Tunisia’s own economic history should serve as a cautionary tale against compromising the Central Bank’s independence. 

In the early 1980s, populist economic mismanagement led to a surge in the budget deficit from 2.8% of GDP in 1980 to 8.1% in 1983. 

Much as what we are witnessing today again in the country, the state favoured convenient shortcuts over the necessary but challenging structural reforms.

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Starting in 1982, Tunisia’s then-minister of finance and planning asked the Central Bank Governor to execute a series of accounting transactions that would provide direct financing to the Treasury beyond the confines of the budget. These transactions amounted to 5.8% of the GDP at the end of 1983.

By the late 1980s, this approach proved short-sighted and a failure, and Tunisia in the end had to resort to the IMF for assistance in addressing its financial imbalances.

Despite initial efforts to safeguard the Central Bank’s independence, there has been ongoing interference, marked by a high turnover of governors prematurely relieved of their duties. Initially stable with three governors serving for 22 years from its establishment in 1958 until the 1980s, subsequent appointments — excluding the current one — have seen seven out of ten governors removed prematurely due to political considerations.

Tunisia’s government has to see the light

Bilateral donors must underscore the imperative of preserving the independence of the Tunisian Central Bank and advancing its modernisation, alongside crucial negotiations for an IMF deal. 

The prohibition on direct Central Bank financing to the budget has been in place since 2006. For Tunisia to move backwards and invoke policies that proved to be clear failures in the 80s, is to send the country’s fragile economy reeling into freefall.

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Tunisia’s Central Bank has made notable progress in transparency, but further improvements are needed. 

These include preventing government representatives from joining its Board and establishing clear criteria for the appointment and dismissal of its governor and directors, adhering to legal deadlines for annual report publication, engaging external experts for policy evaluations (as seen in successful initiatives in England, Australia, Ireland, Chile, Spain, and elsewhere), making archives accessible to researchers, and announcing significant decisions through press conferences.

The inevitability of structural economic reforms in Tunisia today is crystal clear. 

As the country’s parliament just recently adopted the 2024 budget, the timing of this discourse is opportune. Bilateral donors and multilateral institutions must persist in encouraging Tunisia to engage in meaningful negotiations with the IMF and to safeguard the independence of its institutions. 

Tunisia’s economic future hangs on it. 

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Sadok Rouai is a former Senior Advisor to the Executive Director of the IMF and former Head of the Banking Supervision Department at Tunisia’s Central Bank.

At Euronews, we believe all views matter. Contact us at [email protected] to send pitches or submissions and be part of the conversation.

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Why hard-right libertarian Javier Milei wants to dollarise Argentina’s economy

Javier Milei, the “anarcho-capitalist” presidential candidate who took the lead in the August primaries with his “Liberty Advances” political coalition, owes much of his electoral success to his promise to dollarise the Argentine economy. Disoriented by hyperinflation and rising poverty, many Argentinians see the adoption of the US dollar as the country’s official currency as the long-awaited solution to an economic crisis that they’ve been struggling to escape from since 2018.

With inflation reaching new heights – 124 percent per year – and yet another devaluation of the peso – by almost 20 percent – in August, Argentina increasingly looks like it will never wake up from its economic nightmare. In this context, the emergence of Javier Milei, an anti-system candidate who preaches economic shock measures, came as little surprise to many observers. 

The herald of a “libertarian” capitalism imported from the US that aims to reduce the role of the state to a bare minimum, this former economist turned media animal largely won the “open primaries” of August 13 – essentially a nationwide poll to determine each party’s candidates – organised before the first round of the presidential election, which will be held on October 22. With 29.86 percent of the vote, Milei achieved a result beyond anything that any poll had predicted, beating both Patricia Bullrich, the candidate for the right-wing Juntos por el cambio, and the Peronist candidate, and current finance minister, Sergio Massa.

Read moreFar-right populist Milei finishes first in Argentina’s presidential primary

Since then, the proposals of this overbearing candidate – who wants, for example, to put an end to the political “caste”, who he compares to rats – have taken centre-stage: abolish the central bank and eight ministries (including those of health and education), review the liberalisation of abortion (obtained by Argentinian women in 2021) and abolish all legislation on environmental protection. But it’s his flagship proposal to ditch the peso in favour of the dollar – “dolarizacion” – that has become the subject of endless debates.

Rejection of the political class 

“Given the poor record of the two previous presidencies, that of Mauricio Macri and that of Alberto Fernandez, the speech of Javier Milei, who wants to be a candidate who breaks with the elites who would have governed Argentina badly, has credibility and substance,” explained Gaspard Estrada, executive director of Sciences Po’s Political Observatory of Latin America and the Caribbean (OPALC). “From my point of view, it’s because of this that Javier Milei’s proposals have drawn the interest of some parts of the public.”

Indeed, after the presidency of liberal Mauricio Macri (2015-2019) and that of centre-left Peronist Alberto Fernandez (2019-2023), the combined effects of inflation, devaluations, the Covid-19 pandemic and budget deficits have pushed the country’s poverty rate from 30 percent to more than 40 percent.

So when Milei brandishes a chainsaw as he promises to cut state spending, or when he flourishes giant 100-dollar bills bearing his own face, he inevitably attracts some degree of sympathy in the face of a disoriented political class that no longer has any solid answers to offer Argentinians a way out of an endless economic crisis.

Is it even possible?

Since he became the favourite, though, the former economist has moderated his project somewhat. Dollarisation has subsequently become a “system of free competition of currencies” in which the dollar would ultimately triumph over the peso.

For most economists, this plan does not hold water. Like many of his colleagues, Eduardo Levy Yeyati believes that “dollarisation usually requires a stock of liquid dollars to replace the monetary base”. According to Yeyati, “this amounts to roughly $20 billion to $25 billion in international reserves” in Argentina, but “its central bank has recently posted negative net reserves”. 

“Official dollarisation would require a very substantive loan,” he wrote.

Borrowing on international markets being a priori impossible for an Argentina constantly on the verge of default, this promise from the anti-elite candidate might leave some scratching their heads. The IMF, a key player in Argentina’s political and economic life for at least a quarter of a century, has made its concerns known

“Dollarisation is not a substitute for sound macroeconomic policies,” IMF spokesperson Julie Kozack told reporters on September 28.

Presidential candidate Javier Milei waving a chainsaw during a political rally in La Plata, Buenos Aires Province, Argentina, on September 12, 2023. © AFP – Marcos Gomez, AG La Plata via AFP

For the economists around Milei, such as Emilio Ocampo, who would take over the direction of the central bank in the event of the ultraliberal candidate’s election, it’s a non-issue. For him, “dollarisation has already been done” de facto as, according to central bank data, Argentinians have nearly 245 billion dollars “under the mattress” – that is to say, held in cash or in foreign accounts – despite fairly strict foreign exchange controls. 

“The Argentinians have already chosen their currency,” the candidate never tires of saying, alluding to Argentinians’ frantic race to convert every last peso into dollars.

Dreaming of dollarisation

Tempted by dollarisation, Argentines seem to have forgotten that the previous experiment of that sort ended in 2001 in an unprecedented debacle: a banking crash, bloody riots, the plundering of people’s savings and an explosion of poverty.

In the 1990s, to remedy a hyperinflation that had reached 2,000 to 3,000 percent a year, President Carlos Menem succeeded in establishing “uno por uno” convertability – one dollar for one peso. This inflation-free decade, which Argentines have dubbed “pizza and champagne”, is still remembered as a period of opulence, notably for members of the middle class, who found themselves suddenly rich in dollars.

Read moreStruck by an inflation crisis, Argentinians seek any means necessary to stay afloat

Dollarisation as a remedy for crisis has not met with a great deal of success elsewhere in Latin America either. Across the continent, three countries have trod this path: Panama in 1904, Equador in 1999 and El Salvador in 2000.

Economic journalist Romaric Godin notes, however, that unlike Argentina, “the economies of dollarised countries are often small”, and that in the case of El Salvador and Equador, these two countries can rely on a stable flow of dollars from oil exports (in the case of Equador) and remittances from emigrants living and working in the US.

Estrada also told FRANCE 24 that “the Equadorian experience shows that dollarisation in itself is not an instrument to solve the problems of an emerging economy in Latin America”. 

“What’s more,” he said: “This deprives the Argentine state of a monetary policy, as it will be dependent on the decisions of the United States.”

But these technical arguments are unlikely to dissuade Argentinians from dreaming of dollarisation. And the finance minister, who according to the latest polls could face Milei in the second round of the presidential election, has nothing but tried-and-tested recipes to suggest: run the printing press and increase the budget deficit.

 “This is an election about change, and the question is to know which candidate will have a monopoly on a change that will reassure Argentines,” Estrada said. “One of the main criteria for Argentians to make their choice on is the economy, and the will to evolve and to change economic policy. From this point of view, Javier Milei has the trump card to win the second round if it should come to it.”

This article has been translated from the original in French.

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In Lebanon, it is difficult to know what rock bottom is

It is a humanitarian duty for the Council of the European Union to support the people of Lebanon and issue targeted sanctions against those who continue to promote their own interests to the detriment of the population, Zena Wakim writes.

Beirut’s celebrated nightlife has long had a rebellious air: a subversive challenge to conservative dogma, an antidote to rotten politics and a hedonistic emancipation from sectarian street battles. 

But now even the night has been stolen, increasingly affordable only to the rich. Rolling power outages ensure that the city is bathed in darkness. 

Meanwhile, the tourism ministry excitedly predicted 2.2 million visitors this summer. Most will be Lebanese who long since fled, briefly seeing family and friends still trapped in a quagmire.

In Lebanon, it is difficult to know what rock bottom is, perhaps that’s why EU policymakers fail to treat it as a priority. 

Fifteen years of civil war, an Israeli invasion, a Syrian occupation, over 250 unsolved political assassinations, an unparalleled refugee crisis, the world’s worst economic collapse since the 19th century and one of the biggest non-nuclear explosions in history.

The country is an unaccountable mafia state where over 80% of the citizens now live in multidimensional poverty and where ex-warlords turned politicians turned the state into a host they could feed on. 

Or, to quote the World Bank, the government has “consistently and acutely departed from orderly and disciplined fiscal policy to serve the larger purpose of cementing political economy interests.”

Dystopian scenes and parallel realities

Years of financial misconduct by the government culminated in 2019 when Lebanese citizens found their bank accounts effectively frozen, blocked from withdrawing US dollars and only allowed derisory amounts of Lebanese pounds — a currency that has now lost more than 98% of its value in four years. 

The pandemic and the Russian invasion of Ukraine compounded the financial misery prompting more power outages, medicine shortages and mass emigration. 

Some took to refugee boats across the Mediterranean. Some scavenged for food in dumpsters. 

Others conducted armed heists on banks to demand their own savings, becoming folk heroes in the process.

But amid these dystopian scenes, under cover of banking secrecy laws, the country’s politically connected were living in a parallel reality. 

While ordinary people, those not politically connected, were unable to access their funds, political elites transferred over $10 billion (€9.06bn) out of the country siphoning the pot of liquidities collectively owned by all depositors. 

It wasn’t too complicated since 18 of the 20 largest Lebanese banks are owned by politically exposed individuals.

A whole country running on cash is a win-win for kleptocrats

In lieu of a banking system, Lebanon now runs on cash. In lieu of people to form a thriving economy, Lebanon survives on remittances from abroad (accounting for 38% of GDP).

Using central bank-issued licenses, a few privileged firms in the country are allowed to process these money transfers, conveniently located in areas run by ruling parties. 

One of them is BOB Finance whose chairman is a long-standing ally of the Governor of the Central Bank and the head of the Banking Association. 

The worse the economy, the more urgent the need for remittances. More remittances mean higher profits for the elite’s crony companies.

It is just one of many schemes in Lebanon’s Ponzi economy, and another example of why the banking sector remains a quagmire. 

The cash economy creates a win-win situation for the kleptocrats. The longer Lebanon goes without an IMF plan, the more cash they make. 

And when, or if, said plan should come to fruition and the banking sector gets restructured, they will be the first to show up with the cash to acquire what remains of the economy, including its ailing banks. 

Their industrial-scale looting will go unpunished, and the parasitic networks will continue to strangle the country to destitution.

That is, unless Europe decides to get serious and punish the wrongdoers with travel bans, asset freezes and seizures.

Is there anything left to destabilise?

It is regularly heard in Brussels circles that Syria and Iran are much more of a priority than Lebanon and that sanctions should focus first on Damascus and Teheran. 

The reality is that handling Lebanon as an unrelated matter is an intellectual construct which can only be entertained by bureaucrats who do not grasp the extent of state capture in Beirut.

It has also been a long rhetoric that one shouldn’t rock the boat in Lebanon as long as the refugees are “there” and that any targeted sanctions on the Lebanese political elite might destabilise the country and the region. But is there anything left to destabilise?

In July 2021, the Council of the EU announced a framework for sanctions against Lebanese figures “undermining democracy or the rule of law in Lebanon” while assuming that the threat of sanctions would be deterring for the corrupt elite. 

The two years which elapsed since the framework was issued not only proved them wrong since the situation continues to deteriorate but it showed how much they underestimated the genius wit of those in power who was given a perfect window of opportunity to put their assets in safe heavens.

The cost of this poor bet is borne by the population alone.

It’s time for the party to be over

On 12 July, the European Parliament adopted a draft resolution calling for sanctions on Lebanese elites obstructing presidential elections and the Beirut port blast investigation and those who have enriched themselves to the detriment of the population. 

It now behooves the Council of the European Union to take action. For those that helped impoverish the country, it is time that the party stopped.

Heading the opposite direction from Lebanese visitors this summer will be the elites, jetting out to European properties bought with money looted from the state, perhaps with bags of cash to deposit in European banks. 

They may drive past Gemmayze, the lively neighbourhood for Beirut’s “real nightlife” peppered with bars, galleries, and restaurants that many now struggle to afford. 

It is also the place where the port explosion ripped through three years ago and for which still nobody has been held accountable. Impunity has robbed Beirut of its soul.

While civil society tracks corruption and proceeds to have them restituted to Lebanon, while the victims of the Beirut port explosion gather their last resources to push for justice, while courageous journalists and intellectuals risk their lives to seek accountability, it is a humanitarian duty for the Council of the European Union to support their fight and issue targeted sanctions against those who continue to promote their own interests to the detriment of the population.

Zena Wakim is an international lawyer and President of the Board of the Swiss Foundation Accountability Now, whose mission is to support Lebanese civil society in its desire to put an end to the impunity of corrupt leaders.

_At Euronews, we believe all views matter. Contact us at [email protected] to send pitches or submissions and be part of the conversation.
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For Sri Lanka’s forex-earning garment workers, it’s a daily battle for survival

“I came to Colombo with a dream. Now I have lost it,” the young garment factory worker said, sounding dejected.

She left her hometown in Jaffna, in northern Sri Lanka, six years ago to take up a job at the Free Trade Zone in Katunayake, about 35km north of capital Colombo. “The current cost of living is so high that I barely manage to survive, let alone save a penny,” she said, requesting anonymity. For many like her in the island nation, the economic crisis of last year has hardly let up, although shortages have eased and queues have vanished.

At the end of June, the Central Bank of Sri Lanka pointed to a “sharp decline” in headline inflation, to 12%, and a decrease in food inflation to 4.1%. Except, the figures are in relation to last year’s dramatic rise in prices, as headline inflation surged past 70%, and food inflation hit almost 95%. While cold data may show a reduction in the rate of inflation, consumers do not feel any relief yet. Especially since wages and incomes, across most sectors, have remained stagnant.

Sri Lanka’s apparel industry, which took off on a big scale after the country liberalised its economy in 1977, has proved crucial to both its economy and labour force. It is the island’s largest foreign exchange earner — $5.6 billion in 2022 — and employs nearly a million people, mostly women, directly and indirectly across some 400 factories. Garments made in Sri Lanka are exported largely to the U.S. and the EU, to big brands, including, C&A, GAP, H&M, Marks and Spencer, PVH and Victoria’s Secret. The growth and global reach of the industry would make for a great “success story”, if only workers did not have their own story to share.

“Even if we work really hard and make some 30,000 rupees a month (roughly ₹9,340) with all the incentives, it is worth much less today. We are unable to afford the very basic life we lived before the crisis,” said another worker, explaining how her salary has drastically shrunk in real value. “A small bun at the tea shop round the corner used to cost 50 [Lankan] rupees (roughly ₹13). Now it’s 150!” She, too, requested not to be named, fearing punishment for speaking to the media. “Even if this job is hard and pays much less than I need, I can’t afford to lose it. I must somehow support my children,” the mother of two said.

The apprehension of workers is not baseless. Far from isolated personal experiences, their accounts reflect the predicament of scores of workers employed in Sri Lanka’s apparel industry, according to unions and labour rights organisations.

“The financial pressure on workers, especially manpower [contractual] workers, is very high. Despite their best efforts braving exacting working conditions, their wages are just not enough to cope in our country’s current situation,” contended Ashila Dandeniya, Executive Director of Stand Up Movement. “Desperate to supplement their incomes so they can support their families, many young women are taking up commercial sex work in the area. And there are many challenges that come with that,” she said. Instead of spending on “so-called” CSR activities, manufacturers need to pay workers a fair living wage, in her view.

Manufacturers are yet to heed to the demand. For Sri Lanka’s garments sector, the first big blow came well before the economic meltdown, in the form of COVID-19. As factories were forced to shut, workers were left in the lurch. When operations resumed, many found themselves jobless. Worker unions have estimated about 50,000 job losses in the industry through the pandemic and economic crisis in Sri Lanka. Those who remained had their share of difficulties waiting.

In a study on the impact of the pandemic on Sri Lanka’s apparent sector, Shyamain Wickramasingha, research fellow at the University of Sussex, U.K., found that workers’ take-home pay has decreased by LKR 15,000 to 20,000 due to the lack of overtime and other incentives, while targets increased by 50% or more. “Many workers said they were skipping meals, water, and even washroom breaks in order to meet these targets,” Ms. Wickramasingha said, while presenting her findings at Colombo’s Social Scientists’ Association recently. If the plight of permanent workers is difficult, that of manpower or contractual workers is only more precarious, according to Rashmini De Silva, an independent researcher studying gender and labour. “Many of them stand by the entrance to the EPZ [export processing zone] by 4.30 a.m. for a shift that starts at 7 a.m. to make sure that they make it to the quota of workers chosen for work that particular day. The manpower agencies negotiate a daily wage per worker with the factories, and often keep 25-30% of the pay meant for the worker to themselves,” she said, based on her recent research. Further, she found that trade union leaders were under heavy scrutiny by the employers, and abrupt, illegal dismissal of workers engaging in trade union activity was not uncommon.

Despite evidence from multiple research studies, garment manufacturers have repeatedly refuted allegations of rights violations or exploitation. On the other hand, they point to challenges facing the industry owing to the global economic slowdown. “Recent data shows apparel exports declining by 14.95% year-on-year to $1.18 billion in the first quarter of this year… which is the lowest since the first quarter of 2013. The industry projects it could be five to six more months before it sees a recovery in global demand,” observed Yohan Lawrence, secretary general of the Joint Apparel Association Forum (JAAF), in an interview to the State-run Sunday Observer last month.

The Forum, made up of Sri Lanka’s top garment manufacturers, has also been making a fervent case for the EU to renew Sri Lanka’s ongoing Generalized System of Preferences (GSP) plus status — a trade incentive offered to vulnerable developing countries — to help the industry recover from the crisis.

Workers and their unions, however, do not see the GSP+ status in isolation, even if it might help secure jobs in the sector. “We want the GSP+ status, but we also want human rights and labour rights to be respected and protected in Sri Lanka. We want our environment to be safeguarded,” Ms. Dandeniya said. The EU regularly monitors if GSP+ beneficiary countries implement the international conventions, including on human rights, labour rights and climate protection, and Sri Lanka is due for review end of this year.

Unions are already voicing concern over likely labour law reforms that authorities are mulling. Last week, the Ranil Wickremesinghe government’s decision to recast pension funds, including EPF, brought more bad news for workers, including in the apparel industry. In a letter to the Central Bank Governor last week, Anton Marcus, joint secretary of the Free Trade Zones and General Services Employees Union, slammed the government for taking a decision that would impact millions of workers, without any consultation.

Meanwhile, the average worker is hardly preoccupied with Sri Lanka securing trade benefits in the EU, or her own rights when everyday survival has become a battle. “I don’t know what to say about my future. I am struggling to find my dream again, because I must first find my next meal,” the worker from Jaffna said.

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Small businesses in Lebanon struggle to stay afloat amid lira’s endless fall

Lebanon’s ongoing economic crisis has left countless individuals and businesses to adapt to the harsh realities of the collapsing economy. FRANCE 24 met with Pierre, an officer in one of the state’s security agencies, and Houssam, the owner of a trendy café in Beirut, who explain the challenges to sustaining their livelihoods.

Before the crisis began in 2019, Pierre enjoyed a comfortable salary of 3 million Lebanese lira (equivalent to $2,000) per month, along with a range of social benefits. However, as the Lebanese lira dramatically collapsed from 1,500 lira to one US dollar (USD) in 2019 to more than 120,000 lira to one USD in 2023, his salary lost 98.5 percent of its value, leaving him in financial straits.

The state’s security agency reduced the working hours of its officers in response to the crisis, requiring Pierre to work only three days a week. Although the state recently tripled his salary to nine million lira, his monthly earnings now barely reach $100 — a mere five percent of his pre-crisis salary.

To make ends meet, Pierre took a second job at Houssam’s trendy café, which pays him in “fresh dollars” (i.e., strong currency, usually USD), ensuring he can sustain his wellbeing amid the country’s deteriorating economic situation and soaring inflation.

Meanwhile, Houssam El Eid, a small and medium-sized enterprise (SME) owner in Gemmayze, a trendy neighbourhood in Beirut, has faced his own set of challenges. His café is a popular spot for young Lebanese and students who flock to Gemmayze for its lively atmosphere, variety of dining options, and the fast internet service provided by Houssam’s café. 

The fast internet is especially valuable for those who need it for study or work, as it is not always available in everyone’s home. Gemmayze is known for its picturesque, narrow streets lined with historic buildings, fashionable boutiques, and vibrant nightlife, making it a must-visit destination for tourists and locals alike.

Houssam’s café in Gemmayze, Beirut, is known for its lively atmosphere, variety of dining options, and fast internet service. © Rawad Taha, FRANCE 24

The currency fluctuations forced Houssam to price his products and services in dollars, protecting his business from the volatile exchange rate. He has also had to navigate the challenges of increased expenses, such as dollarized electricity costs, and staffing difficulties, as skilled workers leave the country for better opportunities. Despite these hurdles, Houssam’s café continues to operate, serving as a lifeline for employees like Pierre who rely on the fresh dollar wages it provides.

“During the crisis, many workers moved from the city to rural areas. At some stage, businesses could not maintain their staff. However, pricing in dollars has allowed us to pay staff in dollars, even though we cannot pay the same salaries as before.”

Speaking on the impact of currency exchange and pricing on SMEs, El Eid says, “Before pricing in dollars, our business was affected negatively on an hourly basis due to the fluctuating exchange rate. The change in the exchange rate made us lose money.” 

“If I sold an item for one dollar,” El Eid explains, “I had to change the price of the exchange from 100,000 to 118,000 lira; if not, I would incur an 8,000 lira loss. However, updating the exchange rate during the day helped mitigate some of these losses.” Before this adjustment, businesses used to price every other week and wait for competitors, resulting in a poorly functioning market.

When asked about the survival of SMEs in Lebanon, El Eid says, “The survival of SMEs depends on various factors. For instance, small markets, grocery stores, and even supermarkets survive because people will always need to buy essentials, even though their spending habits may have changed. The situation differs in coastal areas compared to villages and varies across different sectors and the target audience.”

He notes that high-end and elite brands in the Food & Beverage sector retained their customer base, while smaller shops and commercial chains catering to the masses have been slightly affected. Still, those who were hit the most were businesses catering to the middle class and the youth, as thousands left the country and emigrated.

El Eid also addresses the electricity crisis and its impact on SMEs: “The electricity crisis in Lebanon has been a massive burden, with businesses now paying thousands of fresh dollars, which is not reflected in the prices they can sell at. Previously, electricity and utilities in the Food & Beverage sector should have constituted a maximum of five percent of total sales, but now these costs have risen to above 10 percent.”

He adds that SMEs suffer, and staying in the market is more challenging as a service, that used to cost $10 now costs $7 or less because people can no longer afford it, despite businesses having higher running costs.

El Eid emphasizes the need to define Lebanon’s role in the economy and its prime offerings for the region and the world, questioning what Lebanon should focus on and whether tourism and the crisis-hit banking sector should continue to play a central role or perhaps other sectors should be further developed.

He concludes, “Everything is based on the economy, and Lebanon will continue to struggle without a clear economic direction. Defining Lebanon’s economic identity and creating a strong plan, roadmap, and reforms, and a new political class will be essential for the country’s future progress.”

Pierre shares a similar vision to Houssam’s, and their stories are not unique, as many Lebanese citizens have been forced to find additional sources of income and adapt their businesses due to the economic downturn

“Although my financial situation is dire, I feel it’s my duty to continue serving my country in one of its security agencies,” Pierre said. 

“I remain hopeful that the situation will eventually improve, but deep down, I know that the ruling political elite is corrupt and that real change is desperately needed. I wish the October 17, 2019 protests had been able to bring about real change, but for now, I have no plans to leave the country and leave the rest of my family here.”

 

Lebanon's ongoing economic crisis has left countless individuals and businesses to adapt to the harsh realities of the collapsing economy.
Lebanon’s ongoing economic crisis has left countless individuals and businesses to adapt to the harsh realities of the collapsing economy. © Rawad Taha, FRANCE 24

 

This situation is particularly challenging for those who used to rely on a single, stable income from the government. The crisis has also led to a sharp increase in unemployment rates and the closure of numerous small and medium-sized enterprises (SMEs), exacerbating the financial hardships faced by the country’s population.

As Lebanon struggles to find a solution to its economic woes, individuals like Pierre and Houssam continue to adapt to the new reality, taking on extra work, seeking alternative sources of income, and finding innovative ways to keep their businesses afloat. The resilience of the Lebanese people is evident as they navigate through these challenging times. Still, a long-term solution to the country’s economic problems remains crucial to ensure a better future for all.

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By not tackling Ukraine war’s effects, we’re risking further disaster


The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

A year since the start of the full-scale war in Ukraine, the conflict continues to take a devastating toll on people inside the country and those forced to flee. 

However, its ripple effects are also being felt far beyond Europe’s borders. Across the globe, populations continue to be deeply impacted by the disruption of global supply chains, skyrocketing energy prices, and soaring levels of inflation.

This dangerous brew is compounding the effects of conflict, climate change and economic turmoil, which have already tipped vast parts of the globe into a humanitarian crisis. 

And, as ever, the world’s most vulnerable are being hit hardest. 

Everyone everywhere is paying the price of war in Europe

As the full-scale war in Ukraine enters its second year, it is critical that the international community acknowledges the sheer scale of this humanitarian emergency — they have a moral imperative to do so, as well as a geopolitical interest. 

Populations across the globe are paying a heavy price for this war in Europe, while the complex and often protracted crises in their own countries are too often forgotten.

Today, the World Bank says a startling 94% of low-income countries globally are facing soaring levels of inflation, fueled in part by the impact of the war in Ukraine on food and fuel prices. 

According to the IRC’s Emergency Watchlist, which highlights the 20 countries most at risk of worsening humanitarian crises in 2023, food prices have increased by almost 40% over the past year. 

Even when food is available in markets, people can often not afford to put food on the table for their families.

This inflation is fueling a global food crisis of unprecedented proportions. Today a record 349 million people across 79 countries are estimated to be experiencing acute food insecurity, according to the World Food Programme, as famine looms across parts of East Africa.

Poorer countries hit the hardest

Meanwhile, the shockwaves across global energy markets are being felt most acutely by lower and middle-income countries — many of which are yet to recover from the impacts of the COVID-19 pandemic. 

According to the International Energy Agency, some 70 million people worldwide who recently gained access to electricity can no longer afford it, with many returning to coal and firewood to heat their homes.

The ripple effects of the war in Ukraine are shining the spotlight on the fragilities of the international community’s systems to prevent humanitarian crises from spiralling out of control. 

However, they also provide us with some examples of how we can begin to strengthen them. 

For example, the Black Sea Grain Initiative was a much-needed step towards restarting shipments of Ukrainian grain to people in hunger-affected countries.

However, a closer analysis of this mechanism shows that — so far — just 10% of the grain exported through this initiative has been delivered to just five low-income countries: Afghanistan, Ethiopia, Somalia, Sudan and Yemen. 

In fact, Spain has received twice as much as these five countries put together. 

At this juncture, it is vital that the Black Sea Grain Initiative is maintained and adapted to ensure that grain reaches the people who need it most, including the countries most at risk of famine.

We have to break the vicious cycle of global crises

Similarly, the initial response from Europe and the broader international community to protect and support people forced to flee Ukraine has been impressive. 

It proves that they are able to welcome people with dignity and respect when there is the political will to do so. 

They must now continue to support people forced from Ukraine for as long as necessary while applying a similar approach rooted in solidarity and responsibility-sharing to the millions of others displaced from similarly harrowing situations across the globe.

These swift responses can provide a blueprint for what can and must be done to break the vicious cycle of global crises we’re witnessing today. 

First and foremost, global leaders must step up to fix the international community’s response to the hunger crisis. 

While food insecurity is undoubtedly a complex challenge, mass deaths caused by famine and untreated malnutrition are preventable. Solutions exist, but the international community is not using them effectively. 

Urgent steps must be taken to reboot the global response to extreme hunger by both re-energising the Secretary-General’s High-Level Task Force on Preventing Famine and by adopting a simplified protocol to ensure that malnutrition treatment is available to all those who need it.

Civilians in dire need of protection

Secondly, climate change is rapidly accelerating humanitarian emergencies. It’s destroying agriculture and livelihoods, worsening cyclical drought, and eroding coping mechanisms. 

In order to mitigate these crises, it will be vital to better map climate risks in humanitarian settings, as well as identify innovative solutions such as climate-resilient agriculture to ensure rural communities are prepared to face future recurring shocks.

Thirdly, the international community must scale up its commitments to protect civilians in conflict. The war in Ukraine is a stark illustration of the high price paid by civilians when International Humanitarian Law is violated with impunity. 

The most severe abuse of civilians requires actions that transcend politics and polarisation. 

Just as France has been demanding, the permanent members of the UN Security Council should suspend their veto power in cases of mass atrocities.

Lastly, humanitarian aid must be delivered through a people-first strategy, in coordination with NGOs and local civil society, to ensure that it can swiftly and effectively reach people in hard-to-reach areas such as on the frontlines of conflict.

We can’t just stand by and watch

The international community cannot stand witness as the world’s most severe humanitarian crises spiral further out of control. 

Even at a time when a great deal of focus and means are rightly directed at supporting Ukraine, the international community must prioritise concrete action to break the vicious cycle of drought, hunger and famine in other parts of the world. 

If it fails to do so, we will be faced with the same dismal outlook — or worse — a year from now. 

There will be an even greater divide between the West and the Global South, with the most vulnerable bearing the brunt.

_Harlem Désir is the International Rescue Committee’s Senior Vice-President, Europe. Previously, he was the founder and president of SOS Racisme, a Member of the European Parliament, the French Secretary of State for European Affairs and OSCE Representative on Freedom of the Media.
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Lebanese President Aoun leaves office and legacy of economic meltdown


Lebanon’s outgoing President Michel Aoun vacated the palace of Baabda on Sunday, leaving a void at the top of the failing country.

The 89-year-old Christian presided over the state’s financial meltdown and the deadly Beirut port explosion that killed over 200 people in 2020.

Leaving office with no one in line to replace him also leaves Lebanon facing a constitutional crisis.

But despite the troubled legacy thousands of supporters turned out to wave him off after hearing him acknowledge the struggle ahead.

“The situation requires a huge effort,” Aoun told the crowd. “You know how much Lebanon and you yourselves have lost. Without this effort, we cannot put an end to our suffering. We cannot salvage Lebanon out of this deep pit.”

Four sessions in Lebanon’s fractured parliament have failed to reach a consensus to replace Aoun and the cabinet is now operating in a caretaker capacity. 

One bright spot in his legacy is that In his final week as president he signed a US-brokered deal delineating Lebanon’s southern maritime border with Israel – a modest diplomatic breakthrough that would allow both countries to extract natural gas from maritime deposits.

Aoun said the deal paved the way for gas discoveries that could be Lebanon’s “last chance” at recovering from a three-year financial meltdown that has cost the currency 95% of its value and pushed 80% of the population into poverty.

Lebanon has otherwise made slow progress on a checklist of reforms required to gain access to $3 billion in financing from the International Monetary Fund.



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