Analysis: the worsening of public debt threatens the bankruptcy of Arab countries Politics and economy DW

Until a few years ago, the Arab countries, with the exception of a few like Jordan and Lebanon, were not highly indebted countries and even oil-producing countries such as the United Arab Emirates. Libya, Saudi Arabia, Kuwait, the United Arab Emirates and Qatar were able to provide loans and guarantees to other countries tens of billions of dollars year after year. However, the Arab world, with few exceptions, such as Kuwait and the United Arab Emirates, relies heavily on external debt and the sale of bonds or on grants, aids and guarantees to fill the growing deficit, sometimes exacerbated in the budgets of other countries.

Dependence on borrowing and selling bonds and subsidies is no longer limited to poor, middle-income countries such as Jordan, Tunisia, and Morocco, but to oil-rich countries such as Africa. 'Saudi Arabia. For example, the latter, for example, has attracted about $ 150 billion over the past three years, or one-fifth of GDP. In other non-oil countries accustomed to lending, the need has doubled in the last seven years.

Ibrahim Mohamed: The bankruptcy of some Arab countries is unlikely if you do not get a miracle

Semi-intractable cases

In Tunisia, for example, it takes about 2.5 billion dollars a year to meet the budget needs since the overthrow of former President Zine El Abidine Ben Ali. As a result, the debt ratio has risen over the past year to reach 70% of GDP estimated at $ 40 billion, compared to less than 40% in 2011. Also in Egypt, the mountain of debt is rising year after year, currently accounting for over 80% of GDP. This is estimated at 240 billion dollars.

In Lebanon, the situation is so frightening that the bill on the interests of the debt alone absorbs half of the revenues of the State. The debt ratio has reached more than 150% of GDP, estimated at 60 billion dollars. Thus, the Lebanese situation is similar to that of the Greek state eight years ago. Given the country's persistent stagnation in the rice sector and the reluctance of donors to grant more subsidies, aid and loans, no one knows how the new Lebanese government will be able to continue to pay the salaries of its employees and cover the cost of basic services and annuities of debt if the miracle does not occur. 6 $ 7 billion a year.

Loans and corruption

The Arab countries seem to be in a situation where they have no choice but to resort to more loans. With the outbreak of so-called "Arab Spring" protests, the Tunisian economy has weakened and the production and services of key sectors such as tourism and phosphate production have declined. Industrial and agricultural production has also declined and the outbreak of corruption has spread more widely in state institutions. The consequences of this are shown, for example Tax evasion and record trade deficit of $ 6.5 billion last year.

Although the situation in Egypt differs from that of Tunisia, it also suffers from a decline in tourism and the performance of important agricultural and industrial sectors. The role of corruption is particularly important in infrastructure projects that cost billions of dollars by setting low standards, so some of the money will go into the pockets of the corrupt. One of these projects is the construction and modernization of railways, which suffer from negligence and frequent tragic incidents, such as those that hit the Egyptian railway station recently, which have claimed more than 20 lives.

For Saudi Arabia, the demand for loans is mainly due to the drop in oil prices to less than half since 2014. In addition, an annual bill of unprecedented weapons of more than 60 billion dollars per year, not to mention the costs of the war in Yemen and ambitious infrastructure projects. And tourism. Corruption also strikes its branches, especially in the context of arms deals and the construction of new cities and new towers..

The high cost of low-performing infrastructure projects worsens the problem of indebtedness.

A new religion in the service of an old religion

Many countries use loans and guarantees even in situations where they enjoy political and security stability. In economics, one principle says what it means: nothing is better than working with other people's money. However, the problem of investing and disbursing this money to meet previous commitments does not reflect deep economic reforms and feasible investments for many reasons, including the most flagrant lack of transparency and oversight and accounting. real of this mediocre exchange. Thus, the debt, particularly of the International Monetary Fund (IMF), accumulates in such a way that it is difficult for the country concerned to pay its payments and benefits. This forces it to seek new loans to meet previous obligations under more difficult conditions defined by the Fund, in particular through the implementation of severe austerity policies, mainly those whose incomes are limited by raising prices and making them pay more taxes while rich and corrupt groups continue to flee.

These policies are currently contested by the Tunisian street, supported by the Tunisian General Labor Union, which accuses the government of succumbing to the fund's difficult conditions. Prior to Tunisia, similar protests took place in Jordan, Egypt, Sudan, Morocco and other countries. In light of this new trend, the Arab world seems to be held hostage by a borrowing government and an international monetary fund that dictates the evolution of fiscal policies. If the situation continues, the declaration of bankruptcy is not excluded in the countries in debt in lending, including Lebanon and Tunisia, especially as these two countries are experiencing an economic recession unprecedented for years. years..

Ibrahim Mohamed