Archive for category: Economy

Information and stories about economy.

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Addressing Ethnic Inequality in Malaysia

Ethnic inequality in Malaysia
Malaysia made remarkable success fighting poverty over the past 50 years, dropping from 50% in 1970 to almost zero in 2014, in large part due to the decreased ethnic and racial differences in living standards. The road that the country laid to get there, nevertheless, has regrettably led to widespread racial or ethnic inequality and violence in Malaysia.

The Disparity in Living Standards Between Racial Groups and the 1969 Riot

Since Malaysia’s independence from Britain in 1957, the Bumiputera have maintained their status as the poorest group with the lowest average income, as a result of the British colonial heritage in contrast to the wealthier minority contingent of ethnic Chinese and Indians. After independence, the government gave emphasis on economic development, but until roughly 1970, it seems that policymakers were less concerned with ethnic inequality in Malaysia.

A Sino-Malay race riot broke out in 1969 when new opposition parties led by Malaysian Chinese gained more votes than the multiethnic Alliance party that had been in power since independence. The government’s lack of concern for the country’s pervasive ethnic injustices and the Chinese-dominated party’s win, which appeared to be further detrimental to the living condition of the Malays, were the primary motives behind the riot. Malaysia then declared an emergency and suspended Parliament for two years as a result.

Malaysia’s New Economic Policy (NEP)

The government created the New Economic Policy (NEP) in 1970 as a comprehensive affirmative action strategy in response to the race riot in 1969. Many viewed addressing the enormous racial disparities in the county as essential to accomplishing both its dual goals of eradicating poverty and restructuring society. The NEP officially launched in 1971 and ran for 20 years.

In addition to intending to reduce the poverty rate from 49% to 17% in 1990, the extensive affirmative action favored the Bumiputera by ensuring that they held at least 30% of corporate wealth by that year and that all initial public offerings set aside a 30% share for Bumiputera investors. The Bumiputera were promised preferential treatment when it came to housing, employment opportunities in the public sector, company share ownership and essentially in all other possible fields. By using quotas and university scholarships, the Bumiputera received preference in access to public education.

Next, the objective of greater economic growth allowed the non-Bumiputera sector’s share of the economy to decline while, in absolute terms, allowing non-Bumiputera commercial interests to expand. This was known as the “expanding pie theory” in some circles because it predicted that the Bumiputra share of the pie would grow without the size of the non-Bumiputra pieces of the pie decreasing.

This occurred to help the Bumiputera catch up economically with other Malaysians. To assure this, Malaysia enforced ethnic restrictions on share ownership in public companies. The following eight crucial strategies served as the New Economy Policy’s main drivers.

8 Crucial Strategies that are the New Economy Policy’s Main Drivers

  1. Deciding on a definition and metric for poverty.
  2. Raising productivity and enhancing revenue diversity.
  3. Focusing on the extreme poor through a unique program tailored to their requirements and providing other suitable aid to better their circumstances.
  4. Engaging NGOs and private sector entities.
  5. Enhancing the quality of life for the poor by supplying them with social and physical facilities including roads, power, piped water and schools for the rural population.
  6. Offering welfare support to the poor who were old or crippled and hence unemployed.
  7. Maintaining stable prices, which included state interference in the markets for a limited range of foods and other necessities.
  8. Lowering or eliminating the income tax rates for low-income individuals.

The Outcome of NEP

Martin Ravallion wrote in his paper about ethnic inequality and poverty in Malaysia that this country managed ethnic inequality better than many other nations. From 0.51 in 1970 to 0.40 in 2016, the Gini index of household earnings decreased. About 25% of the decline in absolute poverty was due to lower inequality (a pro-poor shift in distribution at a given mean), and the remaining 75% was due to an increase in mean income.

From 4% in 1970 to nearly 20% in 1997, the bumiputras’ share of global wealth increased. The country’s overall wealth increased as well; the per capita GNP increased from RM1,142 in 1970 to RM12,102 in 1997.

Since 1970, the mean income of the poor Bumiputeras has grown more quickly than that of the Chinese or the Indians, but the difference in growth rates has not been sufficient to close the wide absolute differences in mean incomes between racial groups. Relative mean incomes will continue to diverge if the pattern from 1970 to 2016 holds.

Conclusion

Policies that lessen racial disparities, such as affirmative action, can further social objectives besides eradicating poverty, such as encouraging cooperation and social solidarity. The majority status of the poorest ethnic group in Malaysia led to intense political pressure to rectify racial inequity, at least after the loud voices of dissent were heard in 1969. However, it is understandable that poverty reduction in Malaysia is a key metric for gauging the success of virtually any policies, including ethnically-based redistributive initiatives, in a nation like Malaysia, where there are significant racial disparities and an official poverty rate of close to 50% in 1970. While the official poverty rate has nearly reached zero over the same time period, the government has made significant strides in its fight against poverty, although the previous official poverty level is almost probably too low by today’s standards.

– Karisma Maran
Photo: Unsplash

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The Indian Rupee’s Resilience

Rupee’s Resilience
Turbulence in South Asian economies, political upheaval and international events such as the Russia-Ukraine war have caused inflation and a drop in the value of the Indian rupee. The Indian rupee has still performed better in these times of turmoil and global inflation issues in comparison to other Asian and European currencies. The government and the Reserve Bank of India have taken precautions and put controls on imports of goods and overseas investments. The rupee’s resilience has proven to be impressive in many ways and efforts to preserve its value are continuing to impact the cost of living in developing countries in South Asia. Without measures to protect the value of the rupee, inflation could have disastrous effects on the working class and impoverished people whose wages can no longer meet the cost of living.

Increasing inflation and poverty rates are inextricably linked. As the prices of basic commodities increase and the value of a currency decreases, vulnerable populations are unable to keep up with the expenses. The rupee’s resilience will be beneficial in keeping the poverty level relatively stable.

Recent Depreciation

The ongoing war in Ukraine and the subsequent market volatility, combined with U.S. Federal Reserve’s actions to tighten monetary policy have drastically impacted the global market in terms of access to imported goods and depreciation of foreign currencies.

During the month of July, the Indian rupee reached an all-time low. Its value has fallen below 80 rupees per $1 USD as of July 19, 2022, equating to a total value fall of 7.1% since January 19, 2022. Other South Asian countries have followed a similar, worsening trend. For example, Sri Lanka’s currency has fallen almost 80% to 362 Sri Lankan rupees per $1 USD in the same time period. This is due to multiple other factors, including political upheaval and bankruptcy, as the country is facing its “worst economic crisis since independence in 1948.” Less drastically, the value of the Pakistani rupee has fallen about 22% to 216 Pakistani rupees per $1 USD.

Considering the large drops in rupee values and increasing U.S. interest rates, the Indian rupee’s resilience has proven impressive. Falling exchange rates have not caused irreversible damage to the domestic currency as Indian investments are still attractive to foreign investors since the U.S. dollar is simultaneously getting stronger and allowing investors to buy more valuable shares. The Indian central bank has made one of its main goals to maintain a sense of stability and prevent market volatility from impacting its emerging economy. With a stable market and prices, vulnerable populations will be able to access food and basic resources with steady wages.

Effects on Cost of Living

Poverty remains a widespread problem in India, with about 176 million Indians living in extreme poverty as of 2015. The country has made progress in lifting itself from these high rates of poverty with action from the government and Reserve Bank of India, especially amid the COVID-19 pandemic. These measures include “monetary and fiscal policy measures,” increased spending on health and social protection and economic decisions relating to imports and trading with foreign countries.

India relies on imports to provide consumers and its market with services and goods and the depreciating rupee and inflation will undoubtedly prove difficult for the working population of India. Worsening depreciation leads to inflation and higher costs for foreign commodities, including imports such as fuel and oil, imported foods and foreign education. This, in turn, decreases the purchasing power of people’s salaries, which is the most hard-hitting for India’s vulnerable working populations.

However, the depreciation of the rupee “can also support India’s exports as our goods and services become cheaper for foreign importers,” India’s CRISIL analytical company said.

Preserving Value

The rupee has been holding its ground against the dollar due to a fall in oil prices as well as efforts by India’s central bank. The Reserve Bank of India (RBI) increased its intervention in the market over the past decade. Currently, it buys an average of $7 billion from the market every month. RBI also announced in July 2022 that it will “allow trade settlements between India and other countries in rupees.”

The Government of India, also known as the Centre, has also taken measures to safeguard the rupee’s resilience to prevent the rupee from further depreciating and impacting consumer markets to an even greater extent. Investments are one of the main focuses in maintaining the value of the rupee against global market uncertainty. The government is considering lowering limits on overseas investments by Indian residents to counteract depreciation and is making efforts to speed up USD remittances that exporters owe. The Centre could also attempt entering a bond index for more securities and inflow to sell back to investors.

Looking Ahead

Minister of Finance and Corporate Affairs Nirmala Sitharaman has shared that inflation is not expected to severely worsen poverty in India as no one will be pushed “below the lower poverty line of $1.9/day, while only 0.02% & 0.04% of the population will go below higher poverty lines of $3.3/day and $5.5/day, respectively.”

The efforts of the government to protect the purchasing power of the rupee are necessary for consumers to continue supporting themselves, especially those that poverty already impacted. In September 2022, Reuters reported that a minimum of 10 Indian states announced [support of more than] 1 trillion rupees ($12.6 billion), mainly in cash transfers and electricity subsidies, for households to combat inflation.”

– Nethya Samarakkodige
Photo: Flickr

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Libya’s Digital Strategy

Libya’s Digital Strategy
Libya is a country in North Africa. One of the largest countries in Africa, Libya has many deserts and is rich in culture and natural resources. There is a greater requirement for a digital lifestyle in today’s culture. The expanding digitalization in Libya is now undergoing exploitation effectively for the country’s benefit. Beginning on February 15, 2022, in New York, the United Nations Development Program (UNDP) in Libya will concentrate on a new digital strategy to help communities and countries use digital technology as a tool to help combat and expand economic opportunity, promote diversity and reduce inequality. UNDP intends to keep up with the constantly evolving digital landscape and advance the Sustainable Development Goals (SDGs) with its daring new Digital Strategy 2022–2025.

Implementation

According to UNDP Libya, the strategy provides a three-pronged strategy for how UNDP would help countries profit from digital technology. First, UNDP will integrate digital into its work, experiment with new methods and technologies, scale up effective solutions and use foresight to comprehend potential futures in order to amplify development outcomes. Second, it will ensure that everyone is included in digital technology by making building more “inclusive digital ecosystems.” Third, UNDP will keep evolving and setting the bar high in order to satisfy present and foreseeable technical needs. To promote cooperation around the ethical and sustainable use of technology, UNDP will also interact with business entrepreneurs, academics, researchers, students and policymakers.

The Reason the Digital Strategy is Necessary

Libya has grappled with the problem of conflict since April 2019. Unfortunately, this has negatively affected Libya’s services such as electricity. According to a Human Rights Watch article, “The United Nations-recognized and Tripoli-based Government of National Accord (GNA) has been embroiled in an armed conflict with the rival Interim Government based in eastern Libya.” As a result, violence impeded the delivery of essential services, including power and health care. Armed groups on all sides persisted in carrying out illegal killings and indiscriminate shelling that killed civilians and destroyed crucial infrastructure.

In addition, when Libya’s provisional unity government formed in March 2021, internet freedom declined significantly. The population became less able to have access to the internet. The population grew adamant about better living conditions and less corruption in 2020 and as a result, local authorities throttled cell service. Libya has endured technological issues and the plan will guide UNDP’s efforts to address the new issues that the new digital environment brought on. There is also a large digital gap that UNDP is trying to diminish. There is a digital gap of about 2.9 billion people in developing countries and this consists mainly of women and children. Digital technology has the potential to amplify biases and further inequities if it is not used responsibly.

A Promising Future

Libya’s digital strategy has a strong potential for success. It will help Libya to benefit from a more digitized economy. According to UNDP Libya, “the strategy complements the U.N.’s global efforts to expand access to affordable broadband and enhance the digital capacity of key groups including women and people with disabilities – ultimately creating new opportunities like jobs while boosting human development.” Libya’s Digital Strategy is helping lessen the burden on the less fortunate by ensuring that everyone has access to digital futures, which can improve job opportunities and education.

– Frema Mensah
Photo: Flickr

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World Bicycle Relief: Switching Gears on Rural Development

World Bicycle Relief
In 2018, sub-Saharan Africa accounted for two-thirds of the global population living in extreme poverty. Although the poverty rate across the region decreased by 1.6% from 2015 to 2018, the benefits of improved infrastructure, education and health care have not reached those living in rural areas without safe and easy transport systems to access essential services and opportunities. World Bicycle Relief works to lessen this disadvantage by providing bicycles to members of rural communities in sub-Saharan Africa. Founded in 2005 by F.K. Day and Leah Missbach Day, the organization empowers millions to pull themselves out of poverty.

Gender Equality

World Bicycle Relief places priority on women and girls, with the organization striving for females to account for 70% of bicycle beneficiaries. Girls in sub-Saharan Africa often find that traditional gender expectations for them to take long walks for water and firewood daily, journeys that are sometimes unsafe and increase the risk of assault and harassment, stunt their personal agency. Riding bicycles not only cuts down on time taken for domestic chores but also allows girls to travel to school safely and quickly.

Over the last 10 years, World Bicycle Relief has worked in partnership with the Ministry of Education in Zambia to provide almost 37,000 rural girls with bicycles. A controlled trial found that the bicycles reduced the likelihood of girls dropping out of school by 19%, decreased school absenteeism rates by 28% and reduced school commute times by 33%. Furthermore, experiences of sexual harassment while journeying to school decreased by 22%.

In Kenya, health care workers using World Bicycle Relief-provided bicycles served “88% more patients,” highlighting the importance of effective transport in health and well-being in rural communities.

In a USAID-funded project from 2006-2009, World Bicycle Relief partnered with RAPIDS (Reaching HIV/AIDS Affected People with Integrated Development and Support) to tackle the AIDS crisis in Zambia. The organization gave more than 18,000 bicycles to RAPIDS caregivers, allowing RAPIDS to reach more people and deliver higher quality care due to more frequent visits. Since World Bicycle Relief’s participation in RAPIDS, caregiver retention has risen to 66%, a marked increase from earlier stages.

Rural Economic Development

To ensure that users utilize the bicycles to their best potential, World Bicycle Relief gives each community the responsibility to design and adapt its own bicycle program. The organization’s “field team also helps local leaders establish a Bicycle Supervisory Committee,” which selects each individual bicycle recipient based on factors such as commute time and potential for improved service with a bicycle. Each bicycle recipient “enters into a time-bound term agreement” with the Committee and officially owns the bike upon attainment of specific requirements, such as completing their education, helping to further community development or supplying health or financial services.

In October 2021, USAID announced an allocation of funding of $3.5 million to the Bicycles for Growth Initiative, helping J.E Austin Associates and World Bicycle Relief expand mobility in rural sub-Saharan Africa by facilitating transport through bicycles.

The initiative will support research on “access to bicycles in Ghana, Malawi, Rwanda, Uganda and Zambia,” giving more people the chance to access education, health care services and opportunities for income generation.

– Imogen Scott
Photo: Flickr

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4 Circular Economy Projects Fighting Poverty in Southern Africa 

Circular Economy Projects
Southern Africa faces huge numerous management issues, with South Africa recovering or recycling only 34.5% of its waste in 2017. However, organizations are mobilizing communities to tackle both this issue of waste and poverty through one tactic. Circular economy projects empower disadvantaged communities to clear and upcycle waste, creating income opportunities and helping the environment. Here is some information about some circular economy projects and what they are doing to eliminate poverty in southern Africa.

Wasteland Graced Land Project

Headed by Dreamcatcher Foundation’s Anthea Roussow and University of Brighton waste expert Ryan Woodward, the 2020 Wasteland Graced Land project has helped transform the South African town of Melkhoutfontein into a tourist destination by turning its plastic waste into sellable products. Thanks to a £65,000 grant from the British Council’s Developing Inclusive and Creative Economies, the project has empowered locals to create crafts and souvenirs such as jewelry, toys, mosaics and bowls – all from Melhoutfontein’s waste products. Grant money goes toward paying stipends to crafters and provides a small income for waste collectors, enabling many women and unemployed youth to better provide for their families and develop their business skills.

Flip Flop Recycling Company

Founded by Julie Church in 2005, the Nairobi-based FlipFlop Recycling Company (FFRC) upcycles flip-flops that have washed up on the shores of the Kenyan coast into 100 different products. This includes jewelry – some of which has appeared on the catwalk at Paris fashion week. The company buys flip-flops from women who collect them at the coast, employs workers to wash and repair these flip-flops and pays artisans to rehash the flip-flops into various products which it finally sells to the shop. The FFRC provides communities with business training and multiple income opportunities, employing around 40 people at its Nairobi facility in 2012.

3R Ecopoint Network

3R Ecopoint Network is based in the seaside town of Vilanculos, Mozambique, and is focused on reducing the amount of plastic waste that ends up in the Indian Ocean. However, it has also improved the lives of local waste pickers, who play a vital role in salvaging reusable material yet are socially excluded and often seen as criminals or failures. By setting up secondary collection points which buy recyclable waste and selling this waste to recycling industries, 3R Ecopoint Network has not only reduced waste volumes in Vilanculos but also increased the revenue for waste pickers by 23, 525MZN from 2019-2022. One impacted individual is Teresa Navelane, who is now able to buy basic food items using the income she receives from collecting recyclables.

Watamu Marine Association

Negative perceptions about waste pickers are also an issue in Kenya, where the informal waste management sector continues to suffer without proper infrastructure and government support. The Watamu Marine Association (WMA) assists waste pickers outcast by society by creating a plastic waste value chain running between the local community and tourism industry in Watamu and surrounding areas. WMA has employed 100 waste pickers from disadvantaged backgrounds, who earn a weekly income through the sponsored “Cash 4 Trash” beach clean-ups. This income empowers women and youth to participate in business ventures and improve their living standards.

These four circular economy projects have had a significant impact on the communities they work in. Their continued work should offer livelihoods to many individuals and have an even further effect on the reduction of waste.

– Imogen Scott
Photo: Flickr

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Fidel Ramos’ Legacy of Social and Economic Reforms

Fidel Ramos
Fidel Ramos, a former President of the Philippines who ousted a long-standing dictator, died on July 31, 2022 at the age of 94. Ramos served as a general in the Korean and Vietnam wars and played a major role in turning the Philippines into a pro-democratic country. His accomplishments include uplifting millions of Filipinos and eliminating the Philippines’ historic title as ‘the sick man of Asia.’ Press Trixie Cruz-Angeles told the LA Times that “He leaves behind a colorful legacy and a secure place in history for his participation in the great changes of our country, both as a military officer and chief executive.” Here is some information about Fidel Ramos’ legacy including his economic and social reforms.

Democracy Under Fidel Ramos

The dictatorship and policies under Ferdinand Marcos were crippling for many Filipinos and the country’s economy. Although the unemployment rate fell from 7.1% to 3.9% during the early years of Marcos’ presidency, unemployment rapidly rose again in the mid-1970s when it reached 7.9%. By 1985, two-thirds of the population was poor and at least half, or 27 million Filipinos, lived in extreme poverty.

During Marcos’ administration, Ramos was a key figure, serving as a PC chief. However, in February 1986, Ramos resigned from his post and supported the rebellion, People Power Revolution, after a failed coup. The rebellion ushered in a radical transformation in the Philippines and became a symbol against authoritarian regimes worldwide.

When Aquino rose to the presidency, Ramos was able to prevent her from attempting violent coups. In 1992, the people of the Philippines elected Fidel Ramos as President. His administration successfully implemented many reforms to reduce poverty and bolster the Philippines’ economy.

Economic Reforms Under Fidel Ramos

To combat the aftermath effects of Marcos’ dictatorship, Ramos embraced a “comprehensive reform strategy” to open up the economy, reduce macroeconomic imbalances and address structural rigidities. The IMF has supported this program since 1994 and made considerable progress in boosting the Philippines’ economy.

The program accelerated privatization, recapitalized the central bank and opened numerous sectors to new competition such as banking, telecommunication and the oil sector. The limits on foreign participation loosened in many sectors and the program resulted in the removal of import restrictions. The average import tariff in 2000 was 10%, which was one-third of that in the mid-1980s.

However, powerful interest groups that formed under Marcos’ regime of heavy regulation of the economy and income inequality resisted reforms that would even the playing field. Despite this, Ramos was able to reduce inequalities and spur growth. He cracked down on monopolies in various sectors and privatized some government-owned corporations to boost the annual growth to 5%.

Social Reforms Under Fidel Ramos

During Ramos’ administration, the Philippines saw for the first time emergence of massive, coordinated, nationwide poverty reduction programs. Ramos’ Social Reform Agenda (SRA) integrated the delivery of social services, protection and reforms to the poorest provinces in the Philippines where people could not meet their basic needs. Many heralded this program as the most consultative, reform-oriented and well-targeted poverty platform in the history of the Philippines.

The SRA had clear, defined targets and brought together many NGOs, local agencies and other stakeholders during the development, planning and execution process as they monitored stages of poverty intervention.

Through the Comprehensive and Integrated Delivery of Social Services, the 10 most unmet necessities in the community and sector determined the social services. To accommodate the needs of diverse impoverished communities such as the urban poor, farmers and indigenous peoples, 33 indicators underwent implementation that includes basic survival needs, security and capability. These indicators also helped track progress in poverty. The result of these programs proved to be a success as family poverty incidence fell from 39.9% in 1991 to 31.8% in 1997.

Fidel Ramos’ Legacy

Although Fidel Ramos’ presidency ended in 1998, his policies, legislations and reforms continue to be impactful in the Philippines today. Fidel Ramos’ legacy includes the creation of anti-poverty infrastructure in government bureaucracy. The Social Reform and Poverty Alleviation Act of 1997 adopted the SRA into the Commission’s mandated agenda. In governmental agencies like the Department of Social Welfare and Development (DSWD), there was the widespread adoption of the Minimum Basic Needs Survey, poverty information gathering and resource gathering. The data gathered from these instruments continue to be useful today.

Moreover, the Gender and Development Budget Policy, which mandated the allocation of a minimum of 5% of the government’s budget to Gender and Development programs aiding women, passed in 1992. The Philippines is continuing to incorporate this policy annually and revisions have ensured the policy’s effectiveness.

– Samyukta Gaddam
Photo: Wikipedia Commons

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Argentina’s Economy Minister Resigns

Argentina’s Economy MinisterOn July 2, 2022, Martín Guzmán announced his resignation from his position as Argentina’s economy minister, which he held since December 2019, through a seven-page letter posted on his Twitter account. The decision arrived amid conflict in the government concerning the country’s current economic crisis and Argentinian Vice President Cristina Fernández de Kirchner pushing for Guzmán to leave his position. Guzmán alluded to recent disagreements “within the government coalition” as a reason for his departure. Many members of his team have also resigned.

Guzmán’s Career

On December 6, 2019, Argentine President (then-president-elect) Alberto Fernández designated Guzmán as Argentina’s economy minister. At the start of this career, the newly appointed Brown graduate had his first bill approved by the Senate just 11 days after his first day in office. The bill imposed tax increases in specific areas of the middle and upper class while providing tax benefits to the impoverished.

In early August 2020, the Argentine economy minister struck a deal to restructure $65 billion in foreign bonds. Most notably, the former minister engineered a $45 billion debt deal with the International Monetary Fund (IMF). The agreement aims to “promote growth and protect social programs” to tackle Argentina’s economic crisis.

Before resigning, Guzmán planned to head to France to discuss a $2 billion debt deal with the Paris Club of sovereign lenders.

Argentina’s Economic Crisis

Argentina’s economy has been suffering for decades. In July 2022, many Argentine sovereign bonds were worth as low as 20 cents on the dollar — a stark difference from higher rates in October 2020. Inflation in Argentina is staggeringly high, moving toward 70% by the end of 2022. As of July 2022, one United States dollar is worth about 126 Argentine pesos and this exchange rate is still increasing.

An economic disruptor includes truck drivers’ strikes, which have halted delivery of grain, “one of Argentina’s main imports,” to ports. In addition to the COVID-19 pandemic, the devaluation of the peso and a sizeable foreign debt of more than $323 billion by 2020 have sent Argentina into further economic turmoil.

Alongside these struggles, Argentina’s poverty levels are sharply increasing. Due to the severe inflation, the poverty rate in urban centers stood at 37% in the latter half of 2021 and is expected to increase to 39% after the first six months of 2022. This would equate to 500,000 more impoverished people.

The Economy’s Future

Guzmán’s resignation has raised concerns over the economy’s trajectory, most fearing it will head in an even worse direction. Other concerns regard Guzmán’s IMF deal and whether Argentina can meet these needs without the architect of the deal.

On July 3, 2022, one day after Guzmán’s resignation, President Fernández named Silvina Batakis Argentina’s new economy minister. Batakis previously served as the Secretary of Provinces in the Ministry of the Interior and as economy minister of the Buenos Aires province from 2011 to 2015. This week, she stated her belief in “fiscal balance” and her intention to follow President Fernández’s economic program.

In June 2022, the deal with the IMF that former minister Guzmán crafted underwent its first review. This is a sign that the deal may indeed make progress and ultimately come to fruition. A press release regarding this step stated that the program’s policies “will be critical to support Argentina’s economic recovery.”

There are other solutions and aids to Argentina’s economic crisis besides the appointment of a new economy minister — foreign aid. Amid this instability, at least 48 NGO projects in Argentina aim to improve the lives of the country’s poor. A notable organization is Fundación Integrar (Integrate Foundation). The foundation helps young Buenos Aires and La Pampa citizens living in poverty complete their higher education by providing financial aid and guidance to students. With the help of donations, the foundation has given higher education scholarships to 140 students to date.

In office, Argentina’s new economy minister Batakis will need to address the nation’s high inflation rate and foreign debt along with an increasing poverty rate. Yet, she is not alone in this fight — a deal with the IMF is underway and tens of organizations are serving the country’s poor.

– Sophie Buibas
Photo: Flickr

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2022 Sees a Rise in Public Giving

Rise in Public GivingU.S. inflation reached 9.1% in June 2022, the highest inflation rate in nearly 40 years. An alarming rise in the cost of goods and services paired with stock market volatility reflects ongoing concerns of a burgeoning economic recession. Economists’ forecasts grow bleaker as the government races to tackle historic inflation rates. Even so, 2022 sees a rise in public giving despite mounting economic hardship.

2022 Fidelity Charitable Donor-Advised Funds (DAFs)

According to Fidelity Charitable, the largest grantmaker in the United States, Americans donated a record-high $4.8 billion to Fidelity Charitable accounts within the first six months of 2022. Approximately $128 million of these donations went to Ukrainian relief efforts, providing aid to alleviate the many crises Russia’s invasion of Ukraine caused. Donations to prominent NGOs such as Jose Andres’s Central World Kitchen and the International Medical Corps also increased significantly when compared to previous years.

Fidelity Charitable’s 11% increase in donations is a significant divergence from the norm, as charitable giving is generally the first thing cut from the budget during times of financial duress. The 2008 financial crisis, for example, caused donation rates to plummet by approximately 12%, according to Fast Company.

Recent changes in America’s charitable activity can be attributed to the emerging prominence of Donor-Advised Funds (DAFs). DAFs allow individuals and corporations alike to deposit assets for donations to charity over time. Donors invest their charitable donations in advance, allowing them to tap into these funds later down the road when a crisis unfolds. DAFs are essentially donation reserves that allow donors to access funds that have been already been set aside, thus enabling a steady rise in public giving despite mounting economic hardship.

DAFs Bolster Americans Capacity to Give

DAFs are quite new and have grown in popularity since the financial crisis of 2008. Because DAFs create a ready supply of donations over time, they bolster donors and charities alike against future economic hardships. Rapid economic expansion in the decade since the 2008 market crash boosted general economic confidence and encouraged expansive investment in DAFs, which is translating into elevated levels of giving during times of crisis, according to Fast Company.

The purpose of DAFs is to increase the amount that individuals and corporations are able to give. They are incredibly flexible, allowing individuals to invest cash donations as well as assets such as stocks, bonds, cryptocurrencies, life insurance and retirement funds, according to Nerd Wallet. The versatility of DAFs is part of what makes them so successful, as they provide a plethora of investment options that appeal to everyone from the wealthy elite to the average middle-class American family.

Once an individual invests assets in a DAF, they cannot retrieve their contribution from the fund. This works to prevent individuals or companies from abusing DAFs for their tax-deduction qualities. Sponsoring organization controls DAFs, which controls the assets within DAFs as well as the investment options available to donors, according to Nerd Wallet. Once invested, DAF assets mature or appreciate tax-free until they are donated.

Some sponsor organizations do not have a mandatory distribution date, meaning that a donor can allow their funds to grow as long as they wish before donating. Other sponsor organizations require donors to contribute a portion of their funds to charity regularly in order to avoid fraudulent activity.

DAFs offer various tax benefits, permitting donors to receive tax deductions for their DAF contributions. Tax-related donor benefits contributed to the expansive rise in DAF investment in the past decade, fostering the current rise in public giving despite mounting economic hardship. The tax deductions attributed to DAFs faced criticism in the past as they provide a possible tax shelter for the wealthy. Despite these concerns, DAFs have proven a vital funding source for charities during times of economic volatility by bolstering Americans’ capacity to give.

An Evolution in How Americans Give

Although it is America’s largest DAF sponsor organization, expanding DAF investment is not unique to Fidelity Charitable. The 15th annual DAF report by the National Philanthropic Trust of 2021 analyzes data from 976 charitable DAF sponsor organizations from 2020. The report found that DAF donor grants reached approximately $34.67 billion in 2021, an astonishing 27% increase since 2019.

Additionally, the number of individual DAF accounts within the U.S. reached 1 million for the first time in history. This encouraging increase in charitable investment and DAF donations seems counterintuitive considering the economic austerity imposed by the COVID-19 pandemic. The success of DAFs in 2020 and 2021 reflects the current rise in public giving despite mounting economic hardship.

Experts are confident that donation rates will continue to rise as 2022 persists, surpassing all previous records. Historically, Americans tend to give more during the fourth quarter of the financial year. The President of Fidelity Charitable, Jacob Pruitt, expects this trend to continue, with hopes of surpassing 2021’s year-end record of $10.3 billion, Fast Company reports. These donations will be a pertinent source of aid for low-income nations that are most vulnerable to high inflation rates.

Most DAF sponsor organizations do not have a minimum initial contribution, meaning anyone is welcome to open an account, according to Nerd Wallet. A small initial investment followed by regular deposits will appreciate over time, allowing one to mature their donation reserve at a pace that fits their financial situation. DAFs are an investment, so starting one now will not reap immediate results nor will it provide instant gratification.

If the past few years have taught us anything, it is that the course of life is unpredictable and that there will always be someone, somewhere in need of assistance. DAFs were designed with this reality in mind, enabling charitable individuals to plan ahead and prepare a ready reserve that can be tapped into when the need arises. A small DAF contribution today could translate into a major impact in the future, so there really is no better time to start investing than the present.

– Mollie Lund
Photo: Flickr

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Inflation in Egypt 

Inflation in EgyptIn 2022, inflation has been sweeping across the world like wildfire, and it has impacted the world’s impoverished the most severely. Here is some information about inflation in Egypt.

Inflation on the Rise

Inflation in Egypt rose to 13% in June 2022 from 11% in April 2022, after only seeing an inflation rate of 4.8% at the end of 2021. The Ukrainian war caused an increase in costs of goods which also caused the interest rates in the country to rise. These interest rates were already some of the highest in the world before the increase. These increases in the costs of imported and exported goods have made it much more challenging for the working class of the country to make a living.

There has been an increase in the prices of simple goods like bread, rice and sugar, making it hard for families to sustain themselves, and even things like nuts have moved into the category of luxury for most families. Inflation has affected individual families and Egypt’s economy as a whole as Egypt’s purchasing index contracted for the 18th consecutive month in May which is what caused the country to raise the interest rates for the first time since 2017. This has put a strain on small business owners who sell goods to survive because they no longer can afford to buy the product that they sell.

Humanitarian Impact

The U.S. has donated $30 billion in economic aid to Egypt since 1978 in order to provide stability to the region. USAID’s current plan to help the economy is to reduce the rising cost of food in Egypt. U.S. aid to Egypt reduced by 85% from 1998-2020 from $833 million to $125 million in 2020, however, the Biden Administration has requested $1.43 billion in aid for Egypt in 2022 amid the pandemic and the Ukrainian war.

The world cannot control what goes on in terms of the Russian and Ukrainian war, so the Goal of USAID is to impact the country in as many ways as possible from within. As of April 2022, the Biden Administrations’ funds are to go toward creating more and better jobs and enhancing the role of government officials to help the institutions of Egypt meet the economic needs of their people. Inflation in Egypt has been the cause of many people losing their jobs and so plans created to foster the economy are very relevant and should prove useful. Hundreds of thousands of jobs have emerged since 1978 in Egypt due to U.S. involvement, and that growth could be beneficial to combating inflation in Egypt.

Looking Ahead

The inflation crisis in Egypt is far from over, but the world is taking the proper steps in order to attempt to turn the tides. It may take months or years for one to be able to see the impact of the funds that Egypt received, however, the people of Egypt know that their struggle is not going unnoticed and that can be the spark someone needs to keep pushing for a little bit longer.

– Alex Peterson
Photo: Flickr

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Curbing Inflation in Venezuela

Curbing Inflation in VenezuelaInflation is one of the most significant problems in the world right now, as the global inflation rate rises to 6.7% in 2022, almost double the average of the last decade. This is a consequence of the Russian-Ukrainian war and the effects of the ongoing COVID-19 pandemic. Venezuela, which is one of the most in-need countries in South America has finally come out of one of the longest bouts of hyperinflation in the world after 12 consecutive months of the inflation rate rising below 50%, however, three in four people in the country still lived below the poverty line in 2021. The United States and other major players can still do a lot to help the country and curbing inflation in Venezuela is one of the many solutions necessary to improve poverty and economic stability in the country.

Mounting Challenges in Venezuela

In 2016, Venezuela entered a streak of hyperinflation which is when the rate of inflation increases by more than 50% for 12 consecutive months. In 2022, Venezuela has been able to pull itself out of this downward slide pretty simply. The country ramped up printing money in 2016, which became a real issue at the end of 2017 and caused the recent inflation. This has even been a problem in the United States because innately the more currency circulating, the less each piece of currency will be worth. That, along with deficit spending created one of the worst inflation crises in the world.

The solution to this problem appeared to be just as simple as the cause because as soon as the central government of Venezuela decided to stop printing so much money, the inflation rate eased. Although inflation has been on the decline, poverty has still been on the uptick rising to 76% in 2020. Even though these two statistics would seem to be contradictory there are reasons why simply curbing the inflation in Venezuela is not the end all be all.

Solutions

Curbing inflation in Venezuela is only the first step in a long line in order to help the situation in the country. In June 2022, the U.S. announced more than $314 million in aid to help stabilize Venezuela and the rest of that South American region.

These funds will go to multiple countries and aim to improve education and provide COVID-19 relief along with aid for other basic human needs. These funds will also go toward an effort to help potential migrants leaving the country, fleeing in an attempt to find better financial stability. They will also improve access to health care, which has been a challenge for people to access in Venezuela. As many as 5.4 million people have left the country in 2022 because of the unstable economy.

These funds ensure these people can have safe and productive new lives after leaving the country. Venezuelans will receive access to life-saving humanitarian programs like emergency shelters and obtain health care which has been difficult to access because of Venezuela’s own health care system. The International Rescue Committee (IRC) provided health care to more than 100,000 Venezuelans between 2020 and 2022, and since 2017, the U.S. has donated nearly $2 billion in total to Venezuela and the surrounding region. The humanitarian aid provided to the country has already done a lot to improve the lives of those living there and those attempting to leave. Curbing inflation in Venezuela is a step in the right direction.

Looking Ahead

The inflation crisis is severely affecting the entire world including Venezuela. People are having to leave the countries they call home in search of refuge and the possibility of a better life. A person’s displacement is a life-altering event that can change how they live forever. As more and more countries join in the fight to help Venezuela, hope exists that it will have a bright future.

– Alexander Peterson
Photo: Flickr