2023-07-29 19:00:00
Istanbul A new debt crisis is brewing in North Africa and the Middle East – with consequences for Europe. Brussels is already counting on the fact that the flow of refugees will increase significantly again as a result. In addition, the authoritarian oil state of Saudi Arabia is ready to expand its influence in the region south of Europe’s external border.
Several countries are caught in the downward spiral. In Tunisia, people’s purchasing power is falling dramatically, resulting in dissatisfaction and sheer poverty. Political unrest and economic upheaval are threatening in Libya, precisely in the country through which millions of migrants come to Europe.
Current figures from the International Monetary Fund (IMF) confirm the acute weakness of the emerging countries. The IMF expects economic growth in the Middle East and North Africa to halve this year. The organization warns that inflation, high interest rates and turmoil in the global banking market are threatening emerging markets in the region. It is becoming increasingly difficult for them to access new credit.
Concern is now growing in Brussels. Ironically, in the year in which the EU declared war on “irregular migration” and wants to enter into new alliances with North Africa, the countries there are massively losing stability. While Commission President Ursula von der Leyen promises to work “closer with the countries of origin and transit” of refugees, new uncertainties and risks of poverty are emerging there. In mid-July, the Tunisian government and the EU Commission signed a “strategic partnership” to restrict migration from Africa to Europe.
>> Read also: The agreement with Tunisia must be a model for all of North Africa
Many of the affected countries are transit regions for refugees who are on their way to Europe. When these countries are in bad shape economically, the pressure to migrate increases – and the chance for people smugglers to earn a lot of money with the people’s longing for a better life.
The threat of an exodus is increasing month by month. Tunisia, for example, has $2 billion in foreign debt that is due this year. This corresponds to more than four percent of the country’s annual gross domestic product. The rating agency Fitch sounds the alarm: “The default is a real possibility,” it says there.
Fitch Ratings recently downgraded Tunisia’s credit rating to “CCC-“, indicating a high risk of default on its loans. It is the fourth such downgrade by the agency in three years.
Tunisia is still $1 billion short of balancing its 2023 budget. And that despite the fact that there have been some positive signals recently, such as a US$ 268 million energy partnership with the World Bank and the post-corona boom in tourism.
Poverty on the outskirts of the Tunisian capital, Tunis
Inflation in the country is officially ten percent, but the prices of many products have risen much more. Wheat now costs three times more in the North African country than a year ago. To get outside help, the country is currently negotiating a $1.9 billion bailout package with the IMF.
Dramatic situation in Syria, record inflation in Egypt
The situation in Syria is developing even more dramatically. The largest protests since the beginning of the civil war twelve years ago took place in the capital Damascus this month. Similar to 2011, the reason for the demonstrations is the desolate situation of the Syrian economy and the weak national currency. People are increasingly concerned that they will no longer be able to feed themselves and their families.
Egypt is also fighting against the downward pull. At the beginning of July, the government in Cairo signed contracts worth 1.9 billion US dollars to sell state-owned companies in order to alleviate the economic crisis. Egypt’s economy has been suffering from high inflation and the devaluation of the Egyptian pound for more than a year.
Wheat harvest in Syria
Grain prices have risen massively in the course of the Ukraine war. The harvest of Syrian farmers cannot compensate for this.
(Photo: dpa)
In June, the government reported record inflation of 36.8 percent. Inflation is partly related to supply chain disruptions following the Russian invasion of Ukraine in 2022. Egypt imported most of its grain from both countries before the war.
The problems in these emerging countries are also related to rising interest rates in industrialized countries. The Egyptian economy has been running a payment deficit for years. Households, companies and the state spent more than they took in.
Money is withdrawn from emerging markets
However, because global interest rates have been so low for years, investors have been looking for investment opportunities to grow their money, even in risky emerging markets like Egypt. Enough money regularly came into the country to compensate for the payment deficit.
Now that the western central banks are raising interest rates again, the money is flowing back towards the established industrialized nations – and is being withdrawn from emerging markets such as Egypt. As a result, Egypt’s financial deficit has almost doubled this year compared to the previous year.
Saudi Arabian Crown Prince Mohammed bin Salman
Will the oil-rich state fill the vacuum at the external border with the European Union in the future?
(Photo: dpa)
Concern is growing in Brussels, and not only because of the impending new refugee crisis. There one also observes that states like Saudi Arabia serve themselves to the cash-strapped states out of power calculations. It is now feared that generous financial aid could enable them to massively strengthen their influence on Europe’s external borders.
Saudi Arabia, for example, announced aid of 500 million US dollars for Tunisia in mid-July. The oil-rich country often provides financial support to needy countries in the region, but this is never done altruistically, as political observers state.
For example, Saudi Arabia and the United Arab Emirates committed US$ 6 billion for investments in Iraq this month. The kingdom also deposited US$5 billion with Egypt’s central bank and last year issued a directive to invest US$1 billion in Pakistan.
More: “Ukraine urgently needs the sea route” – What the end of the grain deal means
#North #Africas #debt #crisis #trigger #refugee #crisis #Europe