Information and stories about economy.

Blue economyThe “blue economy” is a term that has become increasingly prevalent over the last decade as people, governments and economists have begun to recognize the vast opportunity posed by the ocean and its resources. The World Bank defines the blue economy as the: sustainable use of ocean resources for economic growth, improved livelihoods and jobs while preserving the health of ocean ecosystem.” 

The blue economy sits at the nexus of people and the environment. Although people have lived in coastal environments and utilized ocean resources for millennia, the blue economy represents a consolidated and conscious sustainable development strategy that aims to incorporate the ocean into all levels of the economy – from local to national.

10 Countries Incorporating the Blue Economy into Their Development Strategies

  1. Kenya: The blue economy is a pillar of Kenya’s “Vision 2030,” the country’s development program. One of the major goals is to develop the country’s offshore tuna fishery, which domestic fishers currently underutilize. Other initiatives include seaweed farming, port developments, shipping and tourism.
  2. Vietnam: In Vietnam, the blue economy is a relatively new concept. However, local initiatives have already begun. For example, the Binh Thuan Fisheries Association has established a community management program to encourage sustainable fishing practices. The program resulted in the restoration of the clam fishery, the main source of income for the local community, in less than a year. The new fishing practices which the program brought resulted in the income of local fishers increasing from $15 to $25 per day.
  3. Samoa: Released in 2020, the Samoa Ocean Strategy is a national policy framework seeking to further develop the country’s blue economy. It includes a commitment to protect 30% of the country’s ocean by 2025 as well as support for marine spatial planning and sustainable fisheries.
  4. India: With a coastline of over 7,500 kilometers, the blue economy is developing into a significant industry in India. One notable initiative is recent expeditions into the deep sea to explore potential living and nonliving deep-ocean resources.
  5. China: China was an early and active adopter of the blue economy concept. One example of a small-scale blue economy initiative in China is the restoration of seagrass beds in the traditional fishing village of Chudao to support sea cucumber aquaculture, according to a 2020 article.
  6. Trinidad and Tobago: This Caribbean nation is part of a larger region-wide focus on developing a sustainable blue economy. Strategies are very new in this region, but a number of opportunities are there and the nation is emphasizing the establishment of cross-sector policies and strong institutional regulation.
  7. Tunisia: The Tunisian government has recently begun to develop a national strategy. The country is still in the early stages of implementation but has significant incentives considering that over 66% of its population lives on the coast and depends on marine resources for their livelihoods.
  8. Gambia: Gambia has recently adopted a 10-year plan to support sustainable growth and female employment in its significant mangrove oyster fishery sector. Food and Agriculture Organization (FAO) and the EU are implementing the program.
  9. Portugal: The Portuguese government has been actively trying to enhance its blue economy since 2015. The country has recently received €392.6 million from the European Maritime, Fisheries and Aquaculture Fund to support further implementation of sustainable fisheries and aquaculture.
  10. Costa Rica: The coastal country of Costa Rica is rich in marine resources and economic opportunities, with projects involving sustainable fisheries and marine tourism emerging. The Global Environment Facility (GEF) provided funding to a number of Central American countries including Costa Rica to support the development of blue economies in these countries.

Realizing the Potential

These 10 countries provide only a tiny cross-section of the blue economy landscape emerging across the world. Countries are realizing the ocean’s potential to alleviate coastal poverty and lift overall economic performance. Strategies already in place and being developed will help pave the way to better global ocean management with benefits for both people and the environment.

– Amy McAlpine
Photo: Flickr

iPhone ManufacturingMultinational technology company Apple Inc. first launched its smartphone, the iPhone, in 2007 and the company has since grown to hold about 24% of the global market share for smartphone trading. As of late 2022, the Taiwanese firm Foxconn, formally known as Hon Hai Precision Industry Co Ltd., produced an estimated 70% of the world’s iPhones, largely out of its Zhengzhou plant in Central China. As one of Apple’s most lucrative products, the iPhone accounts for around 50% of Apple’s revenue and around 45% of Foxconn’s revenue. Apple and Foxconn are now working to increase iPhone manufacturing in India, which will serve Apple’s corporate interests while also stimulating the Indian economy and easing unemployment by creating job opportunities.

China has long been the backbone of iPhone production. However, Apple’s significant dependence on China has become an increasing concern due to rising labor costs and strict, zero-tolerance COVID-19 policies, which have hampered production since the start of the pandemic. India’s lower labor costs and rising technology manufacturing sector make it an inviting location for production.

The Make in India Initiative

In 2014, Indian Prime Minister Narendra Modi launched the Make in India initiative to encourage investment in various economic sectors and boost employment rates. According to the World Bank, the unemployment rate in India stood at 7.7% in 2021 compared to 4.6% in China. Make in India highlighted electronics manufacturing as a critical area of development for the country and Modi sees great potential in making India a global technology manufacturing hub. The government also introduced Production Linked Incentive Schemes, which provide financial incentives for investing in various sectors, including electronics manufacturing, that are promising for the creation of new jobs.

Job Creation and Gender Equality

Given that India began producing smartphones less than 10 years ago, it is notable that India is now the second-largest mobile phone manufacturer after China. India’s rapid progress helped attract Apple’s attention, spurring the company’s transition into this growing sector. According to current estimates, India will manufacture around 25% of iPhones by 2025.

As part of Apple’s move into India, its key manufacturer, Foxconn, plans to invest $700 million to construct a new factory in the state of Karnataka in Southern India. Planned for a 300-acre site near Bengaluru, Karnataka’s capital and India’s IT hub, the factory is expected to create some 100,000 jobs. The investment demonstrates Apple and Foxconn’s shared commitment to increasing production in India and decreasing reliance on China.

Apple and its collaborators also hope to build women’s hostels near new factory complexes in India. These would provide female workers with safe accommodation and reduce travel times. The goal is to encourage more women to enter the workforce as manufacturing expands in India, thereby strengthening gender equality in India.

Labor Laws

Additionally, Apple and the Indian Cellular and Electronics lobby group, which represents the company and its suppliers, are pushing for labor law reforms that would make working hours more flexible. Eager to garner a higher share of global technology production, Indian authorities have been receptive to the proposed reforms. In February 2023, the state of Karnataka passed the Factories Bill, which introduces working hours akin to those of China’s iPhone factories.

The planned reforms include moving from three eight-hour shifts per day to two 12-hour shifts. While full-time weekly working hours will remain capped at 48, overtime allowance will increase from 75 to 145 hours across a three-month period. Women will also be allowed to work night shifts, which is currently prohibited in much of the country. With their written consent and employers’ agreement to fulfill certain security measures, such as ensuring safe transport and restroom facilities, women in Karnataka will be permitted to work between 7 p.m. and 6 a.m.

Growing Economies

Such reforms aim to increase the flexibility of work patterns and women’s presence in the workforce while reducing unemployment and encouraging investment in the technological sector in India. Eager for continued economic growth, the Indian government sees Apple’s expansion in the country as an opportunity to create jobs, increase Indian workers’ disposable income and boost overall GDP. In the long term, local sourcing and manufacturing of iPhone components will help further stimulate local Indian economies and lower production costs. Finally, Apple and Foxconn’s demonstrated confidence in India’s technological manufacturing capabilities will encourage further investments.

The Indian government, via the National Sample Survey Organization (NSSO), has not released official poverty statistics since 2011, but other estimates indicate that millions of people in India still endure poverty. Transitioning iPhone manufacturing to India is a mutually beneficial development. Not only will it serve Apple and Foxconn as businesses but it will also strengthen the present and future Indian economy while lifting people out of poverty through job opportunities.

Sophie Sadera
Photo: Flickr

Blue Economy
More than half the population of Ghana gains their income in one of three industries;
agriculture, forestry and fishing. The waters of Ghana are rich with different types of fish such as tuna, barracuda, cape hake and more. The fish is present in the local market and locals export it around the world as well, which could improve Ghana’s blue economy.

Economic Crisis

One might wonder if the ocean could be more useful to Ghana than it already is. Dr. Emmanuel Kofi Mbiah, former Chief Executive Officer of the Ghana Shippers Authority and current maritime consultant and legal practitioner, believes that Ghana’s blue economy could possibly save Ghana from its economic issues. Currently, Ghana is experiencing an economic crisis that it has not seen since the 1980s. Consumer prices have risen more than 40% and there have been widespread food shortages nationwide. The country’s currency continues to depreciate and is currently one of the worst-performing currencies. With that, 3.4 million people in Ghana are living in extreme poverty in 2022.

Blue Economy

Dr. Mbiah is urging the Ghana government to take a severe look at capitalizing on the blue economy to help alleviate some of the economic turmoil the country has been facing. The blue economy is an economic term that is linked to the exploitation and conservation of the maritime environment. He believes that the economic resources that come from the ocean can lift Ghana out of its economic turmoil. Mbiah stated that the ocean and its resources could be worth “over $24 trillion.”

In 2020, the United States of America had 1.7% of its GDP from its ocean economy – which amounts to more than $360 billion. Meanwhile, the ocean economy is worth about €500 billion for the European Union. For these people, they realized long ago the potential of Ghana’s blue economy. Not only does Dr. Mbiah believe that the fishing industry can produce more than it already does, but he also noted that Ghana could use the ocean for its energy power. With renewable energy becoming the new way of the world, Dr. Mbiah wants the government to look into how it can use the power of the ocean for its energy as well.

The Future

By capitalizing on Ghana’s natural resources, the country can help alleviate some of the economic hardships plaguing the country over the last few years. The government should take the potential that the industry has with serious thought. With the proximity to the ocean and the skills that Ghana has, the sea leads to endless possibilities and opportunities.

– Olivia MacGregor
Photo: Flickr

Reducing Global Poverty
According to recent economic forecasts, the global economy is facing a period of increasing uncertainty, making it crucial to revitalize trade and boost economic opportunities. Trade has been a key driver of economic growth and poverty reduction, with more than 1 billion people lifting themselves out of poverty since 1990 due to growth spurred by trade. As such, it is important to prioritize measures that promote trade, as this can help in reducing global poverty and fostering economic growth.

Reducing Global Poverty and International Trade

Developing countries have increasingly benefited from international trade as it serves as a powerful tool for driving economic growth, generating job opportunities and reducing global poverty. Today, these nations account for 48% of global trade, up from 33% in 2000, as they gain access to foreign investment and technology transfer which can increase productivity and promote economic growth.

International trade plays a crucial role in boosting economic growth, creating job opportunities and increasing incomes, especially for those living in poverty. Samsung is an excellent example of a company that has contributed significantly to the economic growth of many countries by creating millions of jobs through its electronics and mobile phone businesses. The company employs a total of 266,673 people worldwide. Walmart, the world’s largest retailer, operates in 24 countries with more than 10,000 stores and has played a role in reducing global poverty through its use of international trade. As the largest employer in the world, Walmart has a total of 2.3 million employees.

However, certain limitations still impede the capacity of the extremely poor to benefit from the broader economic gains. These constraints include rural poverty, fragility and conflict, informality and gender disparities.

Mitigating Downsides of International Trade

While international trade liberalization can lead to enhanced efficiency and sustained economic expansion, it may also trigger short-term adjustment costs and negative consequences for specific groups of workers. To mitigate these potential downsides, it is crucial to foster supply capacity and implement social safety nets.

One way to provide technical and financial aid to developing countries is through the Aid for Trade Initiative. Aid for Trade is an initiative that has the aim of supporting developing countries, particularly the least developed countries, in overcoming trade-related obstacles and increasing their ability to engage in international commerce.

Many developing countries face supply-side and infrastructure barriers that constrain their trade potential. The Aid for Trade Initiative encourages developing country governments and donors to recognize the role of trade in development and mobilize resources to address trade-related constraints. Aid for Trade also provides technical and financial assistance to developing countries, helping them build supply-side capacity, improve trade-related infrastructure and strengthen institutions.

The initiative seeks to minimize negative impacts on vulnerable populations while maximizing the economic benefits of trade, such as reducing global poverty. It also promotes deeper coherence among Aid for Trade partners and an ongoing focus on Aid for Trade among the trade and development community. By doing so, the initiative helps countries to better leverage the benefits of trade while minimizing the negative effects on vulnerable populations.

Next Steps in Reducing Global Poverty Through Trade

To unlock the full potential of trade, reforms are necessary to remove constraints, decrease transaction costs, promote competition and establish clear guidelines for cross-border commerce. Efforts should be redoubled to lower tariff barriers, eliminate trade-distorting regulations and encourage investment in infrastructure that facilitates market access.

It is also necessary to lower trade costs, improve the enabling environment, intensify the poverty-reducing effects of integration policies, manage and mitigate risks that the poor face, as well as improve data analysis to inform policy decisions. Furthermore, it is urgent to address the root causes of global trade tensions, bolster the rules-based trading system and pursue further trade liberalization to drive inclusive and sustainable economic growth, bringing the world closer to reducing global poverty.

In conclusion, the connection between global poverty and international trade is clear, with trade being a key driver of economic growth and reducing global poverty. However, challenges remain in ensuring that the benefits of trade reach those living in poverty. It is essential to promote a fair and equitable global trade system that supports developing countries in overcoming trade-related obstacles and increasing their ability to engage in international commerce. By pursuing these efforts, individuals can continue to leverage the benefits of trade while minimizing the adverse effects on vulnerable populations and ultimately, drive inclusive and sustainable economic growth that reduces global poverty.

– Nkechi First
Photo: Flickr

Kwenda Social Program
The Kwenda social program is an initiative that the government of Angola launched to address the country’s social and economic challenges. Angola is a resource-rich country, but it has struggled with poverty and inequality for decades. The Kwenda social program aims to reduce poverty and promote social welfare through a range of measures that target vulnerable populations.

Angola’s Economic Struggles

Angola is the largest oil supplier in sub-Saharan Africa. Oil production accounts for about half of Angola’s GDP, more than 70% of the Angolan government’s revenue and more than 90% of Angola’s exports. The health and economic crisis due to the COVID-19 pandemic coupled with the subsequent drop in oil prices further crippled Angola’s struggling economy and exacerbated poverty levels.

Impressively, Angola’s government took swift action and unraveled the Kwenda social program in response to the economic strain on the population. The premise on which the Angolan government formulated the initiative is poverty relief for the country’s “poorest and most vulnerable.” The program became the first cash transfer initiative to deliver financial assistance through digital deposits. What makes the Kwenda social program unique is that along with its focus on economic relief, it provides human development and economic activities and aims to help 1.6 million families, 60% of whom are female-headed.

In terms of land area, Angola is “one of the largest countries in Africa,” with almost 70% of the population living within cities. However, that also means that a considerable chunk of the population lives in remote areas. Angolans living in these parts of the country face limitations due to debilitated infrastructure and a lack of public transportation.

This presented a significant challenge to the Angolan government during the economic crisis because the government could not easily reach a major portion (about 88%) of the rural population suffering from multidimensional poverty.

Benefits of the Kwenda Social Program

The Kwenda social program addresses the difficulties in reaching rural populations by combining digital tools with physical cash distribution. Furthermore, the Angolan government has established community centers in exceptionally remote communities with community workers to help facilitate physical cash deliveries to the poverty-stricken. These community centers play an integral role in collecting grievances from the local population, administering and implementing the program and providing health and educational services for disadvantaged youth.

One of the segments of the Angolan population that the Kwenda social program has particularly helped is women. This is because women lead many of the households (60%) that the Angolan government aims to help through the program. Another target group of people receiving financial benefits from the Kwenda social program is the elderly population. More than 10,000 elderly people receive cash transfers as a result of the program.

The Angolan government is not the only financier of the initiative. Of the $420 million set aside for the Kwenda social program, the World Bank is funding $320 million. Additionally, in 2022, the World Bank issued a statement of praise regarding the Kwenda social program. In 2021, the initiative completed more than 300,000 digital transfers to beneficiaries. Additionally, by January 2022, the Angolan government had registered more than half a million families into the program. Of those families, nearly half, 247,000, had collected one cash transfer at minimum.

Looking Ahead

The Kwenda social program is a significant initiative that has the potential to transform the lives of vulnerable populations in Angola. The program is based on a comprehensive and integrated approach that addresses the root causes of poverty and inequality. The program has already had a significant impact on the lives of thousands of households and has helped to promote social inclusion and women’s empowerment. With continued support from the World Bank, the government and other stakeholders, the program has the potential to bring about impactful and lasting change that can build a more inclusive and prosperous social fabric in Angola.

– Aemal Nafis
Photo: Flickr

Poverty in the Niger Delta
The Niger Delta sprawls its oily tentacles throughout the southern coast of Nigeria. Spread over 256,000 kilometers, the 10th largest oil reservoir in the world comprises fields of industrial piping. Oil accounts for 89% of Nigerian exports, yet the region has significant poverty. Big oil makes off with the profits of Nigerian labor, fleecing the nation of its natural wealth and leaving behind a trail of economic and environmental devastation. Shell alone has spilled 17.5 million liters of oil into the region since 2011, laying waste to arable farmland and poisoning groundwater. The Market Development in the Niger Delta Program (MADE) and The Foundation For Partnership Initiatives in the Niger Delta (PIND) are working to drain the quagmire of poverty in the Niger Delta.

Poverty in the Niger Delta

Nigeria only fully embraced democracy in the last decade, with the first peaceful democratic succession occurring in 2015. Nigeria’s Human Development Index (HDI) rose by 13.1% between 2005 and 2015, yet Nigeria is still the 152nd least-developed nation on earth. The population in extreme poverty in the Niger Delta is the largest on earth. About 76.5% of Nigerians live on less than $3.10 a day as of 2009 and one-quarter of children are working. The crux of the issue is that the success of the Nigerian economy is intrinsically bound to oil prices and is subject to the terms of big oil. Until the Nigerian economy is diversified at the individual level, poverty in the Niger Delta will continue to thrive.

The Foundation For Partnership Initiatives in the Niger Delta Against Poverty

PIND is a charitable NGO whose programs “identify, catalyze and leverage opportunities, jobs and incomes… promoting peace and equitable economic growth in Nigeria’s Niger Delta region.” The year 2021 was busy for PIND. Programs targeting issues ranging from youth prospects to women’s rights saw excellent progress toward ending poverty in the Niger Delta.

In 2021, PIND educated 12,199 Nigerian farmers with modern agricultural practices and technologies, incentivizing farmers to invest a total of ₦745.19 million ($1.6 million). PIND also collaborated with the Edo GIS department to map, border and secure arable agricultural land for provincial farmers.

The NGO trained 23 fishermen in Awoye with modern fishing techniques. PIND provided practical demonstrations, equipment and supply links for further purchases. PIND also demonstrated modern fish processing techniques. As a result, primary business owners in the Niger Delta purchased 20 ovens, enabling businesses to increase sales.

In association with A4&T power solutions, PIND facilitated 4,130 people from 650 households and 230 businesses in the Ondo region with access to renewable solar electricity.

An initial cohort of 631 youths graduated from the Youth Employment Pathways program in Delta State in 2021. These youths received training in “technical and vocational skills training across four intervention sectors of ICT, building construction, agriculture and services.” About 232 graduates attained apprenticeships, 161 started businesses and 112 secured paid employment.

In 2021, PIND produced 13 conflict reports to influential community leaders “to facilitate targeted interventions to mitigate emerging conflict issues in the (Delta) region.” In combination with the reports, 51 ‘peace actors’ took 48 actions to resolve conflicts in the Niger Delta region.

PIND collaborated with the Centre for Gender and Development Studies of the University of Port Harcourt to launch an advocacy program to end sexual violence and the ritualistic sacrifice of women and girls in the Niger Delta.

The Market Development in the Niger Delta Program Alleviating Poverty

The Market Development in the Niger Delta Program (MADE), by DAI, is another project alleviating poverty in the deprived Niger Delta region. Its mission is to “tackle fundamental social and economic development problems caused by inefficient markets, ineffective governance, and instability.” Between 2013 and 2020, MADE achieved the following milestones:

  • MADE leased with 551,521 independent farmers, providing them with ‘commercial incentives.’ About 389,441 of these farmers increased productivity and 307,722 experienced at least a 15% increase in income. This represents more than $55 million of the profits that MADE generated.
  • MADE influenced “36 lead firms across five sectors… to invest in 1,982 agricultural inputs, fisheries, poultry and palm oil.” MADE also orchestrated the training of 100,000 independent farmers by inspiring 50 more companies to train impoverished Nigerians. Training enables primary business owners to become more efficient and forge meaningful trade relationships with large corporations.
  • MADE led nine corporations to invest $10 million in 33,000 vulnerable people and human rights abuse victims in the Niger Delta.

MADE and PIND programs have made significant inroads into poverty in the Niger Delta. Agricultural knowledge-sharing endeavors and modern machinery workshops allow impoverished Nigerians to forge successful businesses and livelihoods. Facilitating investment by independent farmers and large corporations affords impoverished Nigerians the prospect of financial autonomy. MADE and PIND promote human rights, peace, democracy, youth prospects, women’s rights and financial development, addressing the root causes of poverty in the Niger Delta with emphatic efficiency.

David Smith
Photo: Wikipedia Commons

India’s Economy
India’s government outlined major economic formalization within the next 10 years. Formal economies create new tax incentives and remove financial burdens an informal economy leaves in place. Informal economies have left in place jobs with no benefits. They can create significant pay gaps between those in informal economies and formal economies. The latest step in formalizing the economy is formalizing the “mom-and-pop” shops, thus creating boosted tax bases and increasing a taxpayer database to remove further economic burdens from the poorest Indians.

Formal Versus Informal Economies

An informal economy or informal economic sector is common worldwide in developing nations. An informal economy or sector is a type of market, job or business that can generate reliable revenue but the government does not properly tax or track. From their offset, informal economies seemed promising, especially to the workers, as they promised a reliable transition between a developing nation and a nation with a solid and robust economy. Instead, as many informal sectors have yet to formalize, they and their workers are putting extra strain on the economy without paying fair taxes.

The COVID-19 pandemic devastated the informal economy workers. In most cases, an informal economic worker works on a case-by-case basis, such as cab and bus drivers in Africa or market vendors. The informal workforce predominantly defines work done on a one-to-one transactional case. The informal economy has been necessary for an economic transition to find areas with sustainable economic growth. However, economic growth, job opportunities, and income possibilities remain low if those areas remain informal.

Workers in informal economic sectors tend to be poorer and have fewer chances to create an upward financial movement for themselves. The continuance of an informal sector or business separates workers from tax benefits, government resources and assistance as needed. As a whole, this can limit the potential upward mobility for an entire region or nation, limiting sustainable economic growth and leaving poverty rates higher than they would be if an economy were to formalize.

Why is India Formalizing its Economy?

India has been aiming to formalize its economy for years, and current Prime Minister Narendra Modi is spearheading the efforts. PM Modi and his government are formalizing India’s economy through sweeping policy changes that can keep workers safe and markets flexible while decreasing poverty rates as access to government assistance improves. Formalizing India’s economy is not an easy task, with a great deal of pushback coming from the informal work sectors, but for long-lasting economic growth, the government began taking small steps in the formalization process.

About 93% of India’s workforce works in its informal economy. When the COVID-19 pandemic hit, and citizens in informal work positions lost most, if not all, of their income, they had to turn to government assistance, forcing a formalization process that proved beneficial for all. Between 2019 and 2021, India’s poverty rate dropped from 55% to 16%, an impressive economic recovery aided by Modi’s push for formalizing India’s economy.

Formalizing India’s economy has been a long time coming, and the government is determined to capitalize on the improvements made during the pandemic and create stable, sustainable growth that benefits all Indian citizens.

The Latest Formalization Steps

The latest steps in formalizing India’s economy include expanding the Goods and Services Tax (GST). PM Modi originally introduced the GST to formalize the economy and plans to expand the GST for the small “mom-and-pop” stores. Expanding the GST is not the first step India has taken to formalize the sector of small corner stores. India’s government implemented zero Merchant Discount Rates (MDRs) on all digital financial transactions for stores earning less than Rs 20,000 a month.

Expanding the GST will bring additional businesses under the tax umbrella to lighten economic burdens on others and other businesses that may have heavier taxes as compensation for the remaining untaxed businesses. Formalizing India’s economy brings the mom-and-pop stores government assistance as needed, as many suffered due to shutdowns during the COVID-19 pandemic, and business-to-customer (B2C) interactions minimized. With the GST’s growth, the Indian government wants to use private and public databases to track the development of B2C interactions to understand each region’s economic growth and stability.

Formalizing India’s economy is necessary for lifting millions of citizens out of poverty, creating jobs that can last generations and bringing tax and government benefits to all citizens. PM Modi and his government are striving to support their citizens in unprecedented ways in India. Expanding the Goods and Services Tax is one of many ways to build national economic strength.

– Clara Mulvihill
Photo: Flickr

Sri Lanka's Debt Crisis
Sri Lanka’s debt crisis has become the latest point of geopolitical contention. The country experienced extreme economic hardship during the COVID-19 pandemic, leaving it unable to pay billions of dollars worth of debt to private and government creditors. Following an unprecedented defaulting of its debts and a political crisis that saw the president resign and the prime minister’s office raided, Sri Lanka stands on the precipice of an economic and humanitarian catastrophe. With the United States, Russia, India and China all weighing in, the world’s monetary eyes have turned toward the struggling island nation.

A Closer Look at Sri Lanka’s Collapse

Sri Lanka’s debt ballooned over the last few years due to domestic crises and an unfavorable economic situation. Relying primarily on exports to feed an ever-growing deficit, the country’s situation took a turn for the worse when pandemic supply shocks and tourism dried up foreign revenue, causing blackouts along with food and energy shortages. Unsurprisingly, political turmoil quickly followed suit, ending with the ousting of President Rajapaksa and the ascension of Wickremesinghe to office. Now, Sri Lanka has nearly no foreign reserves and a 119% debt-to-GDP ratio.

If the macroeconomic situation seems dire, it pales in comparison to the suffering of Sri Lanka’s poorest citizens. Between 2021 and 2022, poverty rates increased by half to 25.6%, pushing 2.7 million more people into the grips of poverty. Additionally, inflation in Sri Lanka hit a record high of 73.7% in October 2022. With the world’s economy expected to shrink over the next year, Sri Lanka’s predicament threatens to worsen as its crisis deepens.

Sri Lanka’s Creditors

Underlying these pressures are private and public groups using Sri Lanka as a pawn on the international stage. China accounted for close to 10% of Sri Lanka’s debt by April 2021 but refuses to negotiate the amount owed, insisting on “a two-year moratorium” instead. India, China’s competition in the region, offered Sri Lanka an emergency $4.4 billion in credit, attempting to woo the island nation away from its traditional source of funding. The International Monetary Fund (IMF) says it will only consider a relief package if Sri Lanka can come to an agreement with its main creditors.

In addition, private banks have played hardball with Sri Lanka, exacerbating the current crisis. These organizations collectively hold half of Sri Lanka’s debt, lending to the island nation at an exorbitantly high-interest rate. Renowned economists, such as Thomas Piketty, note that many of these companies knew Sri Lanka would be unable to repay its debt but chose to offer it loans regardless. His conclusion is that risky lending must bear the consequences.

Debt Assistance

Although some economists like Piketty champion cancellations of Sri Lanka’s debt, a more moderate solution does seem plausible. The IMF showed more openness to an emergency loan as talks with China and India continued. Provided Sri Lanka passes austerity and anti-corruption measures, the IMF said in September 2022 that it would be willing to give $2.9 billion in funding. Vitally, this aid would allow the country to purchase much-needed medical equipment and food. Private creditors also demonstrated a willingness to restructure Sri Lanka’s debt, pending approval from President Wickremesinghe.

Domestically, Sri Lanka’s president stressed the importance of weathering the economic storm. Urging his fellow countrymen forward, President Wickremesinghe stated that as pay raises for civil servants come into effect “the public would become prosperous, with income sources increasing. The interest rate can be reduced. In another three years, present incomes can be increased by 75%.” Indeed, inflation will likely decrease from 45% in 2022 to 23% in 2023 and only 8% in 2024.

Foreign Aid to Help During Sri Lanka’s Debt Crisis

Amid Sri Lanka’s debt crisis, it is important not to lose sight of those most affected by the country’s economic woes: its people. Given the dire condition of food, fuel and supplies, immediate aid provides the most tangible form of assistance. In June 2022, USAID announced almost $6 million worth of humanitarian aid to Sri Lanka on top of assistance worth close to $12 million a month prior. The funding will “provide cash assistance, short-term jobs, and agriculture supplies such as seeds directly to crisis-affected people to meet their basic needs,” the USAID website says.

Meanwhile, the United Nations raised $79 million to relieve food and medicine shortages in Sri Lanka. Through its Humanitarian Needs and Priorities Plan, the U.N. aims to help about 3.4 million Sri Lankans in need of aid.

With increased aid and pressure from the international community to resolve the crisis, a resolution to the crisis appears, if not imminent, at least plausible. Although this provides scarce comfort to the 6.3 million Sri Lankans that food insecurity has affected as of September 2022, it is an important step in the right direction while humanitarian organizations address the needs of struggling people on the ground.

– Samuel Bowles
Photo: Pixabay

Impact of COVID-19 on Poverty in Bahrain
Just like many other countries in the world, the impact of COVID-19 on poverty in Bahrain was considerable. The nation’s GDP shrank 6.9% due to the pandemic during the third quarter of 2020 when compared with 2019. In comparison to other Gulf states, Bahrain performed slightly worse as Qatar had an economic output of -3.7% and the UAE’s economy shrank by 6.1% in 2020. Though there are no definitive poverty estimations, other indicators point toward an overall increase in poverty in Bahrain during the pandemic.

Reaction to COVID-19

During its worst period, daily new COVID-19 cases in Bahrain rose to 8,000 at the start of February 2022. Bahrain had more than 60,000 active cases by February 7, 2022. As of February 12, 2023, Bahrain has suffered a total of 700,835 COVID-19 cases and 1,544 COVID-19 deaths.

Just like many other governments around the world, Bahrain implemented lockdowns as a countermeasure to the rising COVID-19 infections. By choosing this method to curb the COVID-19 cases in the country, the government of Bahrain effectively brought the country to a standstill. The government halted/restricted the activity of shopping malls, restaurants and cafes, gyms, cinemas, sports events and more.

As a result, both consumption and production in Bahrain dropped. Bahrain’s trade during COVID-19 declined considerably. In fact, “trade with the largest economy in the region,” Saudi Arabia, decreased by 2.1% within the “first nine months of 2020.” Furthermore, trade with Kuwait and the UAE dropped by 15.4% and 21% respectively.

With Bahrain’s unemployment rising to 9.4% in 2020, the government announced an economic stimulus package in March 2020 worth 4.3 billion Bahraini dinars to support the country’s citizens due to the effects of the lockdowns.

The government aimed to keep the private sector afloat and ensure employees continued to receive their salaries for three months. The stimulus package also covered the cost of electricity and water bills for three months and absolved all tourism-related businesses from tourism levies, among other measures. Overall, the stimulus package aimed to reduce the potential increase in poverty in Bahrain due to COVID-19. However, financial worries for Bahrain due to the economic impact of COVID-19 on poverty in Bahrain led to more financial aid from fellow Gulf Arab states Saudi Arabia, Kuwait and the UAE.

Oil Dependency

As a Gulf State, it comes as no surprise that Bahrain has significant oil reserves. However, unlike other nations in the Middle East, Bahrain has not diversified its economy. While significant effort went into reducing Bahrain’s dependence on oil prices, oil and gas revenue still accounted for about 75% of government funds in 2016.

Oil prices fluctuate regularly, and as a result, the Bahraini economy has struggled when oil prices drop. The result has been an irregular growth in Bahrain’s budget deficit. The impact of COVID-19 exacerbated Bahrain’s circumstances and the World Bank stated, “lower oil prices since 2014 had widened fiscal and external imbalances and intensified macroeconomic vulnerabilities.”

Due to the COVID-19 outbreak and subsequent financial impact, Bahrain announced drastic spending cuts in April 2020. According to Al Jazeera, the Gulf Island cut expenditure by up to 30% across ministries and government agencies. Cuts across the board at the government level can affect those on lower incomes more than any other section of the population as many rely on government-run social safety nets to stay financially afloat.

Poverty in Bahrain

Though no official poverty estimates exist that would indicate an increase in impoverishment in Bahrain amid the pandemic, a UNDP “Assessment of the Socio-economic Impacts of COVID-19 on Bahrain” shows a decline in living standards, indicative of poverty. A survey shows that Bahrainis and Bangladeshis living in Bahrain “suffered considerable amounts of self-reported economic distress, in the form of job losses and decreased income.”

However, positively, Bahrain’s unemployment rate reduced from 7.7% in 2021 to 5.4% in 2022. In comparison to other Arab nations, Saudi Arabia’s unemployment rate rose to 9.9% in 2022 and the UAE’s unemployment rate rose to 3.4% in 2021.

Bahrain’s ongoing oil dependence and the effects of government-imposed restrictions during COVID-19 have led to economic instability in the nation. The Bahraini government’s decision to add roughly $470 million to its budget in 2020 to cover potential emergency pandemic spending likely limited the impact of the pandemic on the Bahraini economy.

The stimulus package propelled economic activity and put Bahrain on track to recover from the pandemic. By 2021, Bahrain’s GDP had seen an increase of 2.2%. Diversification of the economy will improve economic stability in Bahrain, especially amid recovery from the impact of COVID-19 on poverty in Bahrain.

– Josef Whitehead
Photo: Flickr

Zimbabwe Since Mugabe
Zimbabwe, officially the Republic of Zimbabwe and formerly recognized as Rhodesia. Zimbabwe is a landlocked nation in southern Africa bordering South Africa to its south and Zambia to its north. The nation gained independence in 1980 after a long period of colonial rule. Similarly to South Africa, Zimbabwe suffered a period of white-dominated rule in which the country suffered severe human rights violations, especially to the majority black population.

One of the longest-sitting leaders in modern times, some considered Robert Mugabe to be a revolutionary hero. Having led the Zimbabwe African National Union-Patriotic Front (ZANU – PF) and ousted the minority white government of Zimbabwe, Mugabe became the leader of the nation. Serving as President from 1987 to 2017. At first, many in Zimbabwe may have felt optimistic about Zimbabwe’s future, but after 30 years of economic stagnation and rampant hyperinflation, a military coup ultimately ousted President Mugabe. His dismal leadership of Zimbabwe’s economy and reports of many human rights violations are the main reasons for his departure. Here is some information about Zimbabwe since Mugabe.

The Economy

Unfortunately for President Mnangagwa, his predecessor left Zimbabwe in economic peril. With Mugabe gone, there was much elation at the prospect of a new leader in Zimbabwe, with many finally believing that the worst may be behind them. Mnangagwa promised the people of Zimbabwe economic prosperity and more democracy. The President stated at ZANU – PF headquarters that “No one is more important than the other. We are all Zimbabweans. We want to grow our economy. We want jobs.”

However, economic prosperity has yet to come, with some in the nation believing that Zimbabwe since Mugabe has actually worsened. Zimbabwe’s inflation problem seems to have continued under the new leadership, having a 557.2% inflation rate in 2020. However, 2021 saw a 458.66% decline in inflation to 98.55%.

The problem with hyperinflation is that the Zimbabwean dollar is effectively worthless, making it very hard for the economy to grow as foreign imports will simply be far too expensive. Many in Zimbabwe prefer using the U.S. dollar, whereas the South African Rand is the most common. However, the GDP per Capita in Zimbabwe was $1,774 in 2021, a 29.23% increase from 2020.

Poverty in Zimbabwe requires attention. The poverty rate in Zimbabwe was 85% in 2019, a 0.9% increase from 2017, the year Mugabe left the presidency.

Indicating that in the nearly six years since Mugabe, the government has been unable to make any significant change to poverty in the nation. Alongside a disturbingly high poverty rate, the country has an estimated 90% of the citizens either unemployed or work informally to make a living.

Human Rights

Perhaps unsurprisingly, with Mnangagwa being a member and leader of the ZANU – PF party, the same party as former President Mugabe and the only party in power since the ending of the white minority rule in Zimbabwe, human rights in Zimbabwe continue to be an issue in the nation.

Mnangagwa promised change in Zimbabwe, however, according to Human Rights Watch (HRW) the situation continued to decline in 2020 under President Mnangagwa. According to HRW, more than 70 critics of the government were abducted and tortured in 2020. The HRW stated that “Security forces also continued to commit arbitrary arrests, violent assaults, abductions, torture and other abuses’ against anyone critical of the government.”

With Human Rights violations such as these, it is fair to suggest that not much has changed in Zimbabwe since Mugabe. As ex-President Mugabe received criticism for corruption and silencing of critics. 

Government Reaction to Human Rights

Under the leadership of Mnangagwa, Zimbabwe only repealed one law from the Mugabe era. Critics have suggested the government’s slow implementation of its commitment to political reform shows its lack of interest to re-engage with the international community. Instead, the party with a stranglehold of the politics in the nation would rather pursue the continuation of power in Zimbabwe. Al Jazeera spoke to a Zimbabwean citizen who said that “Under Mugabe, things were getting bad. It’s the same group of people (in power) essentially.”

The government however refutes this, suggesting that Mnangagwa has managed to stabilize the currency and committed to opening up the country for business. While the future certainly looks dim for Zimbabwe since Mugabe, there are some glimmers of hope. Zimbabwe actually has the second-largest platinum deposit in the world. The nation also has a significant amount of gold with more than 4,000 recorded gold deposits found so far in Zimbabwe. While the country’s mining sector in the Great Dyke has been inefficient up until now, the government aims to grow its platinum exports considerably.

Looking Ahead 

The potential of Zimbabwe’s mining sector could be huge, generating more revenue, creating new foreign investment opportunities and long-lasting well-paid jobs for Zimbabwean citizens. If done correctly, the government in Zimbabwe may be able to significantly reduce severe levels of unemployment and rampant poverty.

 – Josef Whitehead
Photo: Flickr