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Tunisia’s Demonstrated Addled Adjustments

2018 February 4 by

After a 7% MSCI gain in 2016 to match rival Morocco, Tunisian shares were spooked early in January as nationwide protests again erupted on the seventh anniversary of the previous Ben Ali regime’s ouster to coincide with popular anger against staple price hikes to curb the budget deficit under the IMF program, where the second review to release $1 billion was delayed over lackluster results. Security forces arrested hundreds of participants including opposition party activists, as the prime minister acknowledged grievances with insistence that low-income subsidies would be preserved. The Fund compiled a defense of its policies under the $3 billion 4-year arrangement, which succeeded the original Arab Spring one, in the form of a question and answer list admitting “short-term hurt” with fiscal measures against the “unsustainable” wage bill in particular, among the world’s highest, which accounts for half of spending. They also increase VAT on luxury items but keep basic food product protection, with recommendations to place pension and health services on sounder financial footing.  Structural reforms such as state bank and enterprise restructuring have progressed at the same time to enable likely first quarter Board approval of the next installment, the text suggests. Following the pattern in North African neighbors Egypt and Morocco, which recently widened its fluctuation band, the authorities will consider greater exchange rate flexibility and dinar deprecation to aid competiveness, especially with external debt at 80% of GDP with reserves down to three months imports. The official salary adjustment emphasizes voluntary exit and early retirement rather than layoffs, and social spending like cash transfers for medicine and education are maintained while the fuel price hike targets wealthier households, according to the analysis. Anti-corruption and business climate improvement steps are in the mix, with new investment and banking laws despite a controversial amnesty for company and individual repatriation of questionable wealth accumulated under the old government. Financial inclusion is a supplementary focus to embrace micro and small firm credit, digital payment and central scoring and information bureaus. The IMF points out that it charges 3%, half the yield on Tunisia’s 2017 Eurobond, and that 30% youth unemployment is a paramount priority that can best be tackled through the program’s creation of private sector productive jobs.

The month before the EU was under fire for keeping the country on a tax haven blacklist as French President Macron prepared for an end-February trip since special rules remained for exports and financial services. It was named along with fifteen other “non-cooperative” jurisdictions, and the Tunisian President condemned the action as blocking transition to a “21st century state.” The UAE, where shares dropped 1% on the MSCI index last year as one of the few losers, was also on the roster for missing a deadline for tax information sharing. Dana Gas was an exception to the exchange damage, with a double-digit surge on apparent victories in contractual disputes.  It won a $2 billion arbitration claim against Iraq’s Kurdistan region for non-payment, and local courts may uphold its failure to honor a $700 million sukuk which lawyers argue was sharia-non-compliant despite an English tribunal ruling for creditors like Black Rock and Goldman Sachs. Appeals may drag on for years placing deals and the industry at mutual risk pending definitive divinity scholar direction, according to experts.

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Iran’s Botched Banking Rescue Roar

2018 January 29 by

The Tehran Stock Exchange’s one-year performance in dollar terms showed an 8% gain into December, one quarter the almost 35% MSCI emerging market surge, as mainly working class protests first erupted in the second city of Mashhad over pocketbook economic and credit hardship. Just before the massive “bread and jobs” rallies the International Monetary Fund in its annual Article IV consultation underscored the urgency of bank bad loan removal and recapitalization, amid preliminary steps to place unregulated lenders under central bank control and shut them down if violating prudential rules. They have been closed suddenly without public notice, and small savers lured by higher rates beyond the mandatory 15% ceiling have lost or been unable to access accounts without a formal deposit insurance system.

Many of these underground providers have ties to the Revolutionary Guard(IRGC), which dominates the economy with major stakes in stock exchange-listed companies, and their collapse coincided with first-ever budget disclosures that it is in line for multi-billion dollar allocations while consumer subsidies face cutbacks to achieve fiscal balance. The IMF mission pointed out that additional government debt to cover bank cleanup will reinforce pressure and recommended ending tax exemptions benefiting the giant bonyad religious foundations in particular. President Hassan Rouhani won reelection campaigning for financial system modernization and integration, but has been stymied by officials and legislators in the revolutionary “old school” Supreme Leader’s camp. Their resistance has delivered a body blow to income improvement aspirations under nuclear deal sanctions relief, which the US may now roll back under the Trump administration’s tougher “decertification” stance. It urged the demonstrators to continue regime confrontation and prepared to reinforce IRGC punishment for military action in Syria and the region, while foreign investors from Asia, Europe and the Middle East focus equally on the banking crisis stalemate.

The President reprised his second term mantra after the protests spread nationwide by declaring the need for “major economic surgery” and referring to illegal credit firms as a “tumor.” GDP growth has rebounded to the 4-4.5% range with oil exports back to capacity, but inflation again is at 10% on higher food and fuel prices while youth unemployment is estimated at double to triple the official 12% level with millions of skilled professionals emigrating for jobs overseas. In the speech he asserted that the government must be accountable for corruption, with state and partially-privatized banks that dominate the $700 billion industry a prime conduit for insider deals resulting in scandals, including popular outrage last year around chief executives receiving hundreds of thousands of dollars in salary. The Fund’s Article IV statement ticked off a series of overdue measures to restore confidence and conform to frontier market norms, including a comprehensive audit and related-party loan bar, and a “time-bound” plan to write off real estate and other dud assets calculated at 20-30% of the total under international accounting standards. It also called for finalizing anti-money laundering laws to meet a Financial Action Task Force end-January deadline, and for a freer exchange rate after it tumbled 10% against the dollar the past year despite central bank intervention.

Since the Joint Comprehensive Plan of Action was inked two years ago lifting cross-border restrictions, almost 300 foreign banks have forged correspondent relations with Iranian counterparts. Chinese trade and development specialists have the largest lines under the Belt and Road initiative, with $25 billion recently committed for energy and infrastructure projects. Russia’s Export-Import Bank signed agreements in early January, and elsewhere in Europe smaller commercial institutions such as in Austria have been most active to avoid remaining US secondary sanctions. However they continue to steer clear of direct and portfolio investment participation as no profits are projected at the main state banks in the latest budget blueprint, after direct borrowing from the central bank rose 15% as of October. Financials, including government-run pension funds and investment companies deep in the red, have long been stock exchange laggards, with price-earnings ratios often below the five times average. Recently a new private bank IPO was completed and ailing Bank Maskan lost its housing monopoly to spur competition, but the balance sheet remains overwhelmingly negative with leading listings Mellat and Tejarat suspended from trading for lacking financial statements as investor protests also grow louder.

 

 

 

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Lebanon’s Retracted Resignation Roundabout

2018 January 8 by

Lebanese bond prices stabilized and credit rating agencies delayed action after Prime Minister Hariri returned to his post a month after resigning at Saudi Arabia’s behest over his government coalition with Hezbollah, allied with Iran and Houthi rebels in the Yemen civil war accused of firing missiles at Riyadh. He reprised the “dissociation” stance in regional conflicts despite the alignment in effect the past six years in Syria, against stronger Hezbollah fighter support for the Assad regime now prevailing with Russian air power against remaining rebel pockets. Hariri has dual Saudi citizenship and was briefly detained before flying back to Beirut, raising suspicion he was caught in the anti-corruption net for dozens of royal princes held in the Ritz-Carlton hotel. At home his team had finally passed a budget and forged an agreement for parliamentary elections after a decade hiatus. Tourism increased and offshore oil projects were under negotiation since taking office a year ago, although economic growth stayed at 1.5% under a 145% of GDP world-leading sovereign debt pile, which absorbs almost one-third of local bank assets as the major buyers. One-tenth the budget goes to debt service, and the central bank has resorted to fancy financial engineering to maintain allocation alongside the $7-8 billion in annual diaspora inflows. They are needed also to sustain over $40 billion in central bank reserves to maintain the longstanding 1500 pound/dollar peg. Other fixed dollar relationships in the Gulf have been in the crosshairs with geopolitical fissures, notably in Qatar under commercial and diplomatic boycott which recently extended to Tunisia with refusal of airport access. Lebanon’s scheme is considered solid in the absence of depositor flight, which has spiked rarely during shocks such as the assassination of Hariri’s father and Hezbollah-Israel war outbreak.

Egypt floated its currency after reaching a 3-year $12 billion IMF pact triggering heavy foreign investor bond and stock market inflows, and half the sum has been disbursed so far. Growth improved in the latest quarter to 5%, but inflation soared to 30% with the 50% pound devaluation and electricity subsidy adjustment. The budget deficit hit 10% of GDP mainly due to higher interest payments, as the central bank hoisted benchmark rates toward 20% following “prudent” monetary policy, according to the Fund’s November review. International reserves are at a record $37 billion, double the corresponding 2016 level,  to cover seven months imports on combined remittance, and direct and portfolio investment strides. Gulf allies Saudi Arabia and the UAE in turn extended maturities on $4 billion in deposits coming due in 2018. President al-Sisi has targeted their investors to help develop his new desert “administrative capital,” at an estimated $5 billion first phase cost. Private property firms have purchased land and the Chinese will build a commercial center. However potential Saudi sponsors may be rethinking plans with Crown Prince Mohammed bin Salman’s crackdown on wealthy peers, including globetrotting Kingdom Holding chief executive Prince Alwaleed, with a commanding stake in Citigroup. The attorney-general has signaled minimum $100 billion forfeiture from the hundreds of influential business titans under confinement, as next year’s budget hiked spending for the first time in three years on forecast 2.5% growth aided by the captive payments.

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Saudi Arabia’s Veering Vexed Vision

2017 November 10 by

Saudi stocks struggled to stay positive on the MSCI frontier index, where they remain after graduation refusal both there and by rival FTSE, as officials zigzagged on Aramco offering plans and other Vision 2030 elements during the annual Bretton Woods institutions’ gathering and so-called “desert Davos” at a 2-day global investor event in Riyadh. Hundreds of portfolio managers converged on the latter in the hope of securing mandates and insight into the strategy of the $200 billion Public Investment Fund, which plans to double its assets over the medium term through leveraging state enterprise stakes and startup and acquisition deals at home and abroad. It is an anchor in the $100 billion Softbank technology vehicle, the world’s largest, and also revealed ambitions for a $500 billion next decade new commercial and residential zone along the Red Sea called Noem. At the appearances oil diversification was the mantra even with price rebound above $50/barrel and geopolitics was downplayed as a boycott continues against Qatar for allegedly supporting terrorism and Iran, and Yemen civil war intervention results in tens of thousands of deaths from air bombardment and disease and famine. The rejiggering of National Transformation Program deliverables and timetables prepared with assistance from international management consultants was presented as more realistic, despite simultaneous fiscal discipline slippage with the reinstatement of civil servant allowances. The Aramco IPO timetable was extended from next year into 2019, and a local listing now seems preferred over meeting the disclosure and liquidity standards in Asia, Europe and North America after exchanges there plumbed for the business. A private placement cannot be ruled out either to a strategic or financial buyer, with Chinese firms a natural fit under the infrastructure-led Belt and Road initiative. The head of the Capital Markets Authority touted interest in qualified foreign investor and new banking licenses, with respectively 100 applications in for limited stock exchange access and Citibank recently awarded full approval. International activity is only 2 % of the total, but another entry round for smaller institutions is foreseen as development of a second-tier equity market slowly evolves alongside the main Tadawul index. He tried to reassure audiences that the dollar peg will remain indefinitely, while acknowledging interruption in Gulf Cooperation Council banking and monetary union the past decade further stymied by the Qatar split.

Since the Saudi cutoff joined by Bahrain, the UAE and Egypt stocks there plunged double-digits on the MSCI index and the government has drawn on an estimated one-tenth of its $350 billion reserves including the sovereign wealth pool to sustain trade and banking. Cross-border commerce with Iran is up 50 percent in a perverse effect from criticizing previous relations, and Dubai as the regional offshore center has also suffered from suspended contracts and capital and credit flows. Benchmark bond yields stabilized at 3.5 percent after an initial spike on the fallout, as normal reserve assets were roughly doubled to $40 billion using updated IMF methodology. Egypt has benefited from its geopolitical and economic reform choices under a Fund program by comparison, as the central bank  hosted a well-attended reception at the Washington meetings and investment strategists added local Treasury bills to their recommendations, after  long post-Arab spring consideration as an eyesore under the old currency construct.

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Saudi Arabia’s Dulled Driving Ambitions

2017 October 2 by

Saudis shares stayed mildly positive on the MSCI index, as another big sovereign bond issue was prepared to avoid dipping into reserves and Vision 2030 economic overhaul targets were pared back amid reports of political purges within the ruling royal family. A modernizing wing could claim traction as women finally won the right to drive autos after years of protest, although it will not take effect until next year as religious conservatives vow to scuttle the decision. Aramco is still plodding ahead on its IPO as oil reserves are audited and balance sheet information may then dribble out once international listing locations are finalized. Only a 5% stake will be offered, but the megadeal has spawned a raft of other Gulf state energy company taps as over 30 IPOs worth $1.5 billion were completed through September, more than in 2015 and 2016 together. By contrast Moody’s estimates another $30 billion in external bond sales after last year’s debuts. Even with petroleum prices at $50/barrel to moderate the fiscal deficit, it will come in around $50 billion on 1-2% GDP growth, as the National Transformation Program Prince Mohammed bin Salman introduced in 2016 with global management consultant advice was forced to “adjust and adapt” after state employee allowances were reinstated. Domestic energy subsidies were to be cut further in July, but officials have turned wary with unemployment at 12.5 percent and opted instead to concentrate on promoting private sector-led industrial projects. Privatization deadlines have also slipped to the end of the plan period although a dedicated agency was created, and foreign ownership was liberalized for the education and health sectors while curbs remain on stock exchange access. MSCI dashed core roster graduation hopes in its last review, when it urged authorities to lift quotas and also modernize law and regulation for investor protection.

On that front with specific application to Islamic finance, the showdown between UAE-based Dana Gas and its bondholders on the fate of a $700 million sukuk is under close scrutiny. The company missed payments in the past on contract arrears in Iraq’s Kurdish province, which recently voted for independence in a referendum, and seeks to unilaterally restructure the instrument on the basis of retroactive noncompliance with Shariah code. Attorneys and religious scholars have waded into the fight waged at London’s Royal Court, with global houses like BlackRock maintaining big positions. The saga has cast a market pall with an issuance halt and higher yields, and after the London battle a UAE tribunal will pass judgment in December. The imbroglio has a diplomatic equivalent with the Gulf Cooperation Council member boycott against Qatar for alleged Iran and terrorist sympathies. Both sides have waged aggressive international media campaigns, and Moody’s calculates a 25 percent of GDP cost since embargo launch in June, with $30 billion in capital outflows including 10 percent banking system deposit withdrawal. Trade dropped 40 percent, with two-thirds of construction materials routed through Saudi Arabia and the UAE for offshore gas and football World Cup projects. US and Kuwait mediation attempts failed, and the sovereign rating outlook turned negative as the agency report cited an indefinite pause in regional infrastructure and capital market development drivers.

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Iraq’s Unreconstructed Conflict Model

2017 August 23 by

Iraq’s first $1 billion stand-alone bond was oversubscribed at an almost 7% yield as security forces were poised to retake Mosul from ISIS control and the IMF released another $800 million under its $5 billion multi-year program. In February it issued for the same amount with a US government guarantee at 2%, and a decade ago a $2.7 billion restructuring operation was completed for the post-Saddam era. During July global oil prices also rose $10/barrel, but local investors stayed bearish on equities despite the average P/E ratio at 8 times as the Rabee Securities index slipped 10% in June. State banks are main listings and offer high dividends, with only one-fifth the population having accounts, and fees rather than lending driving income with assets concentrated in Treasury bills amid flush liquidity. The IMF’s review noted fragility and missed targets, with millions displaced by military campaigns and billions of dollars in infrastructure destroyed. The budget deficit was 15 percent of GDP last year, but it is to be eliminated through end-decade to stabilize public debt as the current account also returns to surplus over the period with passage of the defense and humanitarian emergencies. One third of the country, including 250,000 Syrian refugees current receive aid, but internal and external repatriation is unlikely to increase in the near-term even with liberation of Mosul and other cities pending credible rebuilding plans. Elections are due next year and the Finance Minister was replaced after losing parliament’s confidence with the Prime Minister assuming the post. Official debt doubled to near 70% of GDP since 2013, and bond yields spiked to 15 percent before the latest standby agreement was reached. The current account hole was over 8.5 percent of GDP in 2016 and covered chiefly by donor flows, as international reserves dipped to $45 billion or six months imports. The currency appreciated in line with the dollar peg, and credit to the economy was flat with banks’ undercapitalization and double-digit NPLs. Non-oil growth should pick up after ISIS’ defeat, while inflation remains low at 2 percent.

Fund conditions will preserve the dollar-linked exchange rate, as devaluation would aggravate inflation and fail to help exports, but simplify foreign currency allocation and trading procedures to shrink the official-parallel level disparity.  The central bank law will be strengthened with prudential rules to reflect prevailing international standards with outside technical assistance. Along with long-delayed bank restructuring the private business climate is in need of overhaul especially on electricity access and anti-corruption. Program risks are high, the report concludes, with a $7 billion financing gap identified for 2018-19 even under positive direction. Gulf, Asian and Western donors have been approached for additional pledges but regional supporters like Saudi Arabia and the UAE are under pressure to get their own houses in order, as reflected in flat stock market performance while the main core and frontier indices are ahead 15-25 percent. Jordan and Lebanon are also down for the year, with large refugee populations, political infighting and security threats, as “frailty” remains the watchword in the IMF’s view almost fifteen years after the international community’s first Iraq attack rumblings.

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The Arab Spring’s Seasonal Exam Markdown

2017 June 10 by

The IMF completed reviews on the second post-Arab Spring round of programs with Jordan, Tunisia and Morocco, as Egypt awaited a turn after signing its agreement six months ago with stock markets flat to negative reflecting the lackluster reports. Jordan’s economic plight remained “challenging” with 2 percent growth, 4 percent inflation and over 15 percent decade-high unemployment. The fiscal deficit fell to 4 percent of GDP last year, with state utility company losses down, but public debt rose to 95 percent and the current account gap swelled above 9 percent. Geopolitical and security tensions still “impinge” on the medium-term investment outlook, despite additional donor support for refugee hosting, now able to be channeled through a World Bank-led $1 billion concessional platform. The Fund urged further moves against tax exemption and evasion and toward public-private partnerships to reduce budget costs and strengthen infrastructure efficiency. The central bank has hiked rates with foreign reserves slipping below target, as work continues on deposit protection, insurance, bankruptcy and other rules to bolster the business climate. Tunisia also was scolded for its runaway government wage bill elevating debt/GDP to 65 percent as growth doubles to a meager 2.5 percent, “too low” to attack youth joblessness and interior region poverty. The 5-year development plan aims to restore stability and tackle structural barriers through corruption and state bank and enterprise cleanups. Exchange rate flexibility and pension overhaul are on the agenda, and the country could benefit from the G-20 Compact for Africa initiative under outgoing host Germany. At home protests have erupted over proposed “economic reconciliation” legislation that would grant amnesty to illegal fund holders in return for declaring and investing the proceeds, as a “second revolution” has sparked occupation of key mining sites triggering military protection. The new US-trained Finance Minister has yet to win additional backing from Washington, as preparations for the joint commercial summit inaugurated last year stay on hold under the Trump administration.

For Morocco’s $3.5 billion arrangement risks are to the “downside” despite an expected growth rebound to 4 percent with unfinished fiscal and banking sector consolidation. Inflation is in the 1-2 percent range, and corporate and household deleveraging cut credit expansion to 5 percent, as the bad loan ratio neared double digits. Concentration with leading banks chasing the same state company borrowers and cross-border exposure throughout Sub-Sahara networks are major concerns, as the construction industry also heads into a weak period. The current account deficit should be 2 percent of GDP this year with good phosphate exports and tourism and remittance inflows. After preliminary fuel subsidy rollback, budget efforts have stalled and the Justice and Development party after securing an extended mandate in October elections intends to pursue decentralization, civil service salary caps, and better public enterprise governance. Parliament is set to approve provisions for bank emergency liquidity assistance as formal supervisory understandings are forged in the respective Francophone zones with a Moroccan presence. The currency peg is gradually shifting to a fluctuation band, and “e-regulation” is at the center of a campaign to lift the number 70 ranking in the World Bank’s Doing Business publication. Small firm credit access is a priority, and new collateral procedures are designed to unblock traditional financial establishment hesitation, according to the latest Article IV survey.

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Iran’s Rouhani Economic Resistance Rut (Asia Times)

2017 May 13 by

After a 5% loss from December to end-March, the Tehran Stock Exchange retraced the previous 79000 point level ahead of May 19 elections pitting the incumbent President Hassan Rouhani against a half dozen approved candidates Hard-liners Ebrahim Raisi, a protégé of Supreme Leader Ayatollah Khamenei, and Mohammed Baqer Qalibaf, the capital’s mayor since 2005 and a contender in the 2012 contest, are positioned as the main rivals after the ruling clerics rejected former President Mahmoud Ahmadi-Nejad’s surprise application for another term. In a televised debate these rivals castigated rising unemployment, officially up 1.5% to 12.5% the past year despite Rouhani’s international nuclear deal for sanctions relief, which restored oil exports to 2 million barrels/ day for estimated 4.5% growth according to the IMF. Their campaign platforms draw on the Supreme Leader’s “resistance economy” concept, spurning Western foreign investment and advocating self-reliance and higher cash transfers to the poor and struggling middle class.

Rouhani has acknowledged slow improvement in living standards since the accord went into effect in early 2016, and lapses in bank and state enterprise restructuring to boost competitiveness. His description at the time of the “golden page” in history was overstated and may be further tarnished should President Trump formally withdraw the US from the six-nation pact, but the stock market is betting he and his team could redouble competitiveness and integration efforts with extended tenure. However even with victory these reform wishes could again be misplaced by populist backlash magnified by the race, as the growing tab to rescue government banks and companies again resuscitates recession fears.

Raisi was appointed to head the country’s biggest charitable foundation, with $15 billion in assets in charge of the holiest shrine in Masshad and close ties to the Revolutionary Guards still under Washington’s commercial and financial prohibitions. An Islamic law scholar, he also spent his career working with the security forces and was a member of the notorious “Death Commission” two decades ago which killed thousands of political prisoners. Supporters tout his experience as head of the religious endowment for charting economic direction that is “pro-people and production” and avoids “social shocks,” according to recent statements. In the past four years of Rouhani’s term the Guards have taken over nominally “privatized” factories and properties, and continue to control large chunks through affiliates of leading stock exchange listings. Analysts attribute their dominance to the “corruption, mismanagement and lack of regulation” which continue to place Iran in the lower tier of the World Bank’s “Doing Business” ranking.

Raisi has seized on the rich-poor gap and 35% youth joblessness to call for a tripling in budget cash handouts, even though fellow conservatives like the parliamentary speaker Ali Larjani remind him no money is available with the chronic deficit and 60% of the population escaping tax. He may turn to the central bank and state-owned lenders as an alternative for resource transfer, but so-called quasi-fiscal activities are already high and explain the 20 percent annual rise in the monetary base jeopardizing the single-digit inflation target. President Rouhani managed to slash the rate from 40% to just over 10% with relatively tight policies, and hailed such achievements as “actions not slogans” in re-election rhetoric. Diversification from hydrocarbon dependence has been another hallmark, and the non-oil current account is now roughly in balance with almost $90 billion in exports for the end-March fiscal year, the Economy Ministry reported.

However bank bad loans following local classification rules remain over one-tenth of portfolios, and proposed cleanup legislation that would stiffen guidelines and grant more independent enforcement and resolution powers are stuck in political limbo. The next government may face an outright crisis with “difficult to address” issues including recapitalization and rollback of targeted lending schemes, according to the Industry and Trade Minister. The overdue reckoning coincides with Iranian bank reconnection to the external SWIFT payments network and applications to reopen branches in Europe in Asia, as smaller counterparts beneath the radar of lingering US sanctions forge correspondent relationships. These ties inject new cross-border risk as the dual exchange rate system also awaits modernization, with such obstacles potentially resistant to near-term change by the surviving reform constituency.

 

 

 

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Refugee Compacts’ Salient Solution Crush

2017 April 28 by

A year-long joint global displacement study group by the Center for Global Development and International Rescue Committee cast the issue as a “protracted crisis” and lauded the new aid compact approach with host countries, while urging comprehensive revamp of supporting economic data and policies. Low and middle-income economies host 90 percent of the 20 million refugees fleeing conflict, who are away on average a decade. Only 25 percent are in camps, and humanitarian and development funding and tools have not matched the duration and severity in a “fractured system.” In 2016 governments, bilateral and multilateral agencies and civil society and private sector representatives met at consecutive conferences to channel billions of dollars to Jordan and Lebanon in initial compact pilots, with a separate pledging session for Syria and the region in London and launch of a concessional loan facility led by the World Bank, allocating $700 million to date, with an associated $2 billion poor country refugee influx window. These pacts work with the UN Commission and other performance based deals kike the EU’s EUR 3 billion to Turkey for Syrian repatriation from Greece and select onward resettlement. Education and job creation have been the main goals and the track record is early but standardized methods and outcome measurement are lacking.

The model of a public-private sector implementation board combining political and technical expertise, as adopted for the US Millennium Challenge anti-poverty program, is absent and impedes shared analysis and planning and rapid negotiation and disbursement timeframes can frustrate lasting results. Social service provision must take into account their scarcity for the existing local population, which typically also has steep joblessness. Refugees are often pushed to the labor market “shadows” and children denied school entry. In Lebanon classes are run in shift for citizens and newcomers, with quality suffering for both amid overcrowding. Jordan committed to issuing tens of thousands of migrant work permits in exchange for World Bank cash and EU duty free import access, but the number has not been reached and only 5 percent are to women. The process is bureaucratic and business startup is also “difficult” with minimum local partner and capital criteria, according to the report. The “right actors” have not been at the table, with limited local non-government input and private sector mobilization at home and abroad. They could be instrumental in putting rigorous assessment and procedure in place and creating an inclusive stakeholder mechanism. Basic information gaps endure across the board, from refugee numbers to job and school enrollment, and cost and impact evidence of integration steps is scant and far from the authors’ ideal of an umbrella policy index. The private sector can inject knowhow, resources  and innovation, but collective action like the Partnership for Refugees started under the Obama administration is nascent, with no cross-border coordination capacity. Business and financial firms are equipped to take long-term risk and crisis fundraising could extend beyond philanthropy to commercial sources. Donors could join in sponsoring ventures such as practiced by USAID’s ideas lab. Skills training and infrastructure building are two areas of competitive advantage where compacts could better deliver on promise with enlarged vision scrapping the humanitarian-development divide, the two study backers argue.

 

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Egypt’s Chiseled Church Chastening

2017 April 22 by

Egyptian shares with a slight first quarter bump on the MSCI index recoiled after a spate of Coptic Church holiday bombings claimed by ISIS, as President Al-Sissi fresh from a White House meeting with President Trump who praised his toughness, declared a state of emergency granting security forces more discretionary detention power. The President came to Washington seeking US designation of the Muslim Brotherhood as a terrorist group, as counterparts agreed to expand economic and military cooperation. He freed jailed predecessor Mubarak around the time of the trip, and a $4 billion Eurobond was successfully placed as foreign investors also tiptoe back into local debt lured by tax-free double digit yields. Since signature of the $12 billion IMF loan late last year reserves are up $7 billion to $27 billion, the highest since the Arab Spring. The World Bank and African Development Bank have released tranches as part of the package, but remittances rose 10 percent in the last quarter after an extended fall as workers finally repatriated cash with the official pound float and the dollar rate settled at 16-17. With 50 percent depreciation tourism recovered overtaking safety qualms, and non-petroleum exports jumped 25 percent in January. Despite headline 3 percent GDP growth, the PMI manufacturing gauge continues to contract, and consumers have been whacked by subsidy cuts and 30 percent inflation. The fiscal deficit spurted to 12 percent of output and unemployment is reported at the same figure although stricter estimates near double it. Dollar shortages persist but officials on the bond road show diverted concern by pointing out imminent offshore gas production from a large field. However with the human rights crackdown Western donors will again come under pressure from advocacy groups to withhold promised aid, repeating the pattern from the military coup against President Morsi in the initial post-Mubarak transition.

Algeria, with hydrocarbons over 95 percent of the economy, had earlier widespread civil unrest and terrorism and has struggled to diversify and reduce state control without official outside help. It recently embarked on a high-profile US investment campaign emphasizing modest fiscal, commercial law and currency adjustments as 4 percent inflation may outpace growth. The central bank predicts dinar stability against the dollar at around 110, and greater competitive scope for the half dozen private banks against dominant government lenders, although the Development Bank will continue to concentrate 90 percent of the portfolio toward small business. The Treasury bond and stock markets will be expanded, and insurance under two-thirds public ownership is a leading target for double-digit annual activity increases. In the Gulf the area is also ripe for international penetration as barriers ease and non-resident investors also snap up new sovereign bonds, where they have taken half of recent deals. In the past the pool was small and local banks as primary buyers rarely sold. Now the size is $250 million and large blocks can be purchased and traded with the entry of additional market-makers. Once uniform top investment grade ratings are more diverse, and repos have developed although long-term hedging products are still lacking. Tax-free financial zones have encouraged participation by foreign pension funds and asset managers, but private domestic peers have yet to establish a broader congregation for fixed income following according to industry experts.

 

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