The COVID-19 pandemic and the war in Ukraine exacerbated the countries’ existing problems due to their weak economies, they added. Arab countries struggling with high debt and weak economies are particularly vulnerable to political and economic shocks that can cause destabilization or even government collapse, Middle East and North Africa economic experts warned on Friday.
They claim that politicians in such countries frequently wield too much economic power, preventing better-qualified specialists from making the required decisions to confront and resolve problems.
During a panel discussion titled “The Political Economy of Debt and Adjustments in Tunisia, Egypt, and Lebanon” at the Middle East Institute in Washington, which Arab News attended, experts said the three countries’ political systems were part of the reason they were thrown into a “profound debt crisis” or even economic collapse. They stated that the COVID-19 outbreak and the crisis in Ukraine had compounded existing challenges in countries with weak economies.
According to Timothy E. Kaldas, deputy director of the Tahrir Institute for Middle East Policy, Egypt is managed by four groups: the military, the presidency, state security, and the general intelligence department.
These powerful bodies “have ultimate control over the decisions that are central to Egypt’s economy, as well as the policies that have significantly contributed to the country’s current economic crisis,” he noted.
According to Kaldas, the monopoly they have on economic decisions has stopped financial professionals from seeking to solve the problems.
“The political economic strategy in Egypt was to leverage the state to finance their (power) consolidation, and in doing so, they established a dependency relationship with Egypt’s capitalist class, where a lot of state spending was funneled through contracts to regime-owned enterprises, particularly the military,” he added.
Kaldas provided a dismal picture of Egypt’s current budgetary predicament and previous state spending. He claimed that the government had invested substantially in expensive mega-construction projects that greatly outstripped Egypt’s needs and capabilities. He noted that the projects were “grandiose and luxurious” in a country dealing with a financial crisis and significant levels of poverty.
According to Kaldas, for Egypt to move into the safe zone of economic recovery and stability, the country’s political leaders must step aside and enable more skilled ministers and experts to take the lead in making economic decisions.
“The state’s solvency is under threat, and the ability to raise financing is under extreme strain,” he continued.
He also urged Egypt’s international partners to refrain from allowing the type of financial mismanagement that is harming the country’s economic development.
According to Ishac Diwan, director of research at the Paris School of Economics’ Finance for Development Lab, nations with poor economies, such as Lebanon and Tunisia, are more vulnerable to political upheaval.
“The shock that came on a weak (economic) structure gave rise to the Arab Spring” a little more than a decade ago, he explained. In the aftermath, “nothing was fixed,” he noted, and nations with weak economies instead took advantage of the ample credit available in the markets, sinking further into debt crises with no obvious road to recovery.
Diwan stated that, despite attracting billions of dollars in foreign capital investment, Lebanon’s divided political structure had impeded the development of a unified government capable of making solid economic decisions.
He said that foreign cash, primarily from the Lebanese diaspora, was not employed constructively but was instead absorbed by the state and the public, ultimately causing the economy to collapse due to a lack of strategic vision among conflicting political groupings.
According to Hamza Meddeb, a fellow at the Malcolm H. Kerr Carnegie Middle East Center in Lebanon, the situation in Tunisia is similar: Politics take precedence over economy.
He claimed that authorities had failed to make required fiscal reforms due to a lack of political cohesion and inflexible coalition governments. He labeled Tunisia’s political leadership as “unwilling” to make difficult economic and debt decisions due to the potential political and social repercussions to the regime.