Headline, August 08 2023/ MIDDLE EAST : ''' '' THE -IMF- TAP '' '''

MIDDLE EAST : 

''' '' THE -IMF- TAP '' '''

THE IMF IN THE MIDDLE EAST : ' Don't care too much for money. ' After years of talks, indebted Arab states and the IMF are at an impasse.

THE IMF LIKES TO SAY it will never walk away from the negotiating table. If a country needs a bail-out, talks simply have no deadline. A few countries seem determined to put this promise to the test.

EGYPT - LEBANON AND TUNISIA are all in dire need of help. Home to roughly one-third of the Arab world's population, they are burdened with high levels of debt and dwindling foreign reserves. They are struggling to import basic necessities and prop up their flagging currencies.

Lebanon has already defaulted on its debts, in 2020 ; bonds from the other two countries pay high yields because of the junk ratings.

'' The most vulnerable economies are being pushed to the brink of debt distress, '' says Jihad Azour, the IMF's Middle East director [ who took temporary leave in June after being named a candidate for president in his native Lebanon ].

All three countries have sought loans from the IMF, hoping to augment their financial buffers and reassure foreign investors. Yet after years of talks with the fund, all are stalling.

The delays illustrate the economic dysfunction in the Arab world's oil-importing states - but also the problems with IMF programmes in the region.

Egypt reached a $3billion deal with the IMF in December. Since 2019 its foreign reserves have fallen from $44 billion to $35 billion, while public debt rose from 80% of GDP to a projected 93% this year.

Investors spooked by Russia's invasion of Ukraine, pulled $22 billion of portfolio investments out of the country last year. With dollars scarce, Egypt has devalued the pound three times since the start of 2022, halving its value to around 30 to the dollar.

Abdel-Fattah al-Sisi's government had hoped an IMF deal would restore confidence. It promised to shift to a flexible exchange rate and to sell billions of dollars in state assets. The pound still looks overvalued, though, trading in the high 30s on the black market.

Annual inflation hit a near record high of 33% in May, far outpacing the central bank interest rate at 18.25%.

The government insists it must build up a buffer of hard currency before devaluing the pound or raising rates again. Foreign investors, understandably, want that sequence reversed : negative real interest rates and a too-strong currency makes both Egypt's debt and its state-owned assets look like bad bets .

So its economy and its IMF programme are at an impasse.The first review of its progress under the agreement, which would unlock more aid and was due in March, remains unfinished.

Tunisia, with government debt of more than 80% of its GDP, started talks with the fund early last year. Foreign reserves have fallen from $9.8 billion in 2020 to $6.8 now. Staple food and many medicines are frequently in short supply.

While it will probably get through 2023 without a default, it may struggle to repay close to $2.6 billion in external debts next year. But Kais Saied, the authoritarian president, all but rejects the idea of an IMF deal, calling '' foreign diktats '' unacceptable.

THEN there is Lebanon, which reached a preliminary agreement with the fund last April. Since 2009 it has plunged into one of the worst economic crises in modern history, the result of a years-long central bank Ponzi scheme to prop up the currency.

Banks are insolvent. The Lira has since lost 98% of its value. Annual inflation has been above 100%  for most of three years.

To finalise the agreement, the IMF has asked Lebanon to implement a few modest reforms : draft a plan to restructure the banks, overhaul the bank-secrecy law and unify its myriad exchange rates. The government has dawdled for more than a year.

The Honour and Serving of this publishing continues into the future. The World Students Society thanks The Economist.

With most respectful dedication to the IMF, Leaders, Students, Professors and Teachers of the Middle East, and then the world.  

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