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How Fiscal Policy can Reduce Poverty

Fiscal policy
In developing nations, as well as nations recovering from a crisis such as the COVID-19 pandemic, fiscal policy is an instrumental tool in revitalizing the economy and alleviating poverty levels. The policies are more than simply “good” or “bad” economics as they are key indicators of a nation’s true political priorities.

In low and middle-income nations, foreign aid and debt relief are invaluable in uplifting their economies. On the other hand, the contributions cannot be fully effective without an effective fiscal system. According to the United Nations, a good fiscal policy centered around poverty reduction, reconstruction and growth will focus on raising the growth rate and fostering lasting economic stability. 

Rising Growth Rate

The International Monetary Fund (IMF) emphasizes that “economic growth is the single most important factor influencing poverty, citing a recent study of 80 countries that revealed that the income of the bottom one-fifth of the population increased in exact proportion with the overall growth of the economy as measured by per capita GDP. In countries recovering from crises, a rising growth rate is one of the most effective ways for an economy to bounce back.

Key Fiscal Policies that Can Promote Economic Growth

  • Shifting Government Spending Away from Subsidies: The World Bank categorizes subsidies as a short-term solution and has indicated that they are typically politically popular because the benefits distribute widely. On the other hand, the World Bank reported that “about half of spending on energy subsidies go to the richest 20%,” as they tend to consume more energy and receive more benefits, leaving the lower-income households with little to show.
  • Investment in Cash Transfers as an Alternative to Subsidies: There is increasing data showing that direct cash transfers are a better solution to important long-run investments within households, such as education. These transfers are more beneficial to the bottom 40% and can stimulate economic activity within communities, and indirectly increase government revenue in both the short and long-term through higher tax revenue. 
  • Implementing a Progressive Tax Structure: A progressive tax structure enables governments to increase welfare benefits, such as unemployment, food stamps and housing benefits to the poor. Tax revenue sources do not change rapidly and improved progressivity in personal income tax, corporate, property, health and carbon taxes offer feasible ways to raise revenue without worsening conditions for the poor. Furthermore, nations may consider indirect taxation, as some of the above methods may not be as effective due to the informality of work in certain economies. Progressive tax structures are most effective in upper-middle-income countries. 
  • Having a National Minimum Wage: National Minimum Wages directly benefit the lowest-paid workers in an economy and reduce wage inequality. A universal basic income (UBI), wherein all citizens receive a weekly benefit to ensure a minimum income guarantee may also be effective.

Economic Stability

Prioritizing spending with long-term impacts is vital in creating a self-sustaining economy that alleviates poverty. Good policies will vary in different country contexts while acting with the future in mind even in crises, despite the fact that the benefits will come to fruition later. Below are some fiscal concepts to stabilize a nation after a crisis and to better prepare for any future challenges. 

  • Debt management is essential to maintain the “fiscal space” for crisis recovery and stabilization. Regulatory reform for financial markets, debt transparency and the implementation of a common blueprint for debt relief and restructuring are useful tools for properly managing national debt. 
  • There are many elements that can equip countries with a strategic plan for an unknown future crisis. First, expanding the reach of automatic stabilizers, such as employment guarantee schemes in nations with a large informal sector, in case of crisis. Setting up adaptive cash transfer programs that can be scaled up when necessary is also a good preparatory measure. 
  • Research and improved data, particularly on the costs and ramifications of certain policy implementations, are essential to maximizing the effectiveness of these policies. Long-term evaluations and research can provide decent indications of long-term outcomes, which is important in deciding which policies are best for unique country circumstances. 
  • In developing economies, a focus on education and diversification of the economy from agriculture to manufacturing fosters a more independent and stable economy. Increased government spending on education cultivates a higher-skilled workforce, and a push towards manufacturing pushes economic development, though proper skills and infrastructure are necessary to accomplish this.

Looking Ahead

Fiscal policy shaped around economic growth and the reduction of inequality has the potential to make great strides toward minimizing poverty. There are limits to the types and degrees of these policies in each country. Therefore, other national policy reforms implemented in tandem with economic policies lead to the best outcome in stimulating growth. Regardless of fiscal policy, foreign aid and international cooperation are invaluable in reducing poverty levels in low-income nations and around the globe.

– Carly Ryan Brister
Photo: Flickr

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Somalia’s Debt Relief With the IMF’s Assistance

Somalia's Debt Relief
The International Monetary Fund (IMF) staff voted in October 2022 to put a vote through to the executive board that, if approved, will grant $10 million to Somalia for debt relief. The new IMF vote is not Somalia’s first time receiving debt relief, but it represents foreign investment expectations for the East-African country. The IMF staff-level agreement combined with other recent foreign debt relief aid can help Somalia’s burdensome debt drop from $5.2 billion to $550 million by the end of 2023.

Somalia’s Economic Strife

Countless factors stress Somalia’s need for debt relief. Somalia’s government and politics fractured in 1991, with an ensuing civil war, leaving Somalia with a government representative of a non-unified nation. Somalia had no proper representation of the various political and regional differences, meaning the nation fell behind the rest of the world in economic development. The issues surrounding Somalia’s critical workforce and agriculture exports represent the financial struggles best.

A secondary key issue is Somalia’s reliance on agriculture. As of 2020, about 80% of the workforce was in agriculture, but seven out of 10 Somalians live in poverty. The high poverty rate of the agrarian-based Somalians partially stems from the intense droughts beginning in the 2018 rain season and locust outbreaks destroying crops. The agricultural difficulties resulted in the intense starvation of more than 213,000 Somalians. The food shortage Somalians are navigating worsened when the war in Ukraine broke out and caused food prices to skyrocket worldwide. The soaring food prices are exacerbating Somalia’s strained food supply further.

Despite the constant changes in Somalia for three decades, Somalia’s debt relief has become an attainable goal as Somalia’s government changed and moved towards new economic policies. The new policies helped Somalia return to the global stage and become a viable partner and economically reliable international force.

The Way Somalia’s Economy Has Recovered So Far

Somalia’s debt relief path truly began when Somalia implemented its Provisional Constitution of 2011, formed an internationally recognized Federal government and created five Federal Member States. The member states recognize the regional differences and political expectations that vary from region to region, creating partial unity towards a common goal. The new government drafted a series of economic reforms that created local economic flow. Economic reforms throughout Somalia provided the government with the framework to maintain financial stability and begin international operations once more.

Since the new government came into power, Somalia’s Gross Domestic Product (GDP) has steadily improved. Despite factors like the food shortage and agricultural struggles, Somalia’s GDP has held firm but quickly drained. About 96% of Somalia’s GDP goes towards paying off its $5.2 billion national debt. Thankfully, the remarkable economic improvements by Somalia reached the decision point for the Heavily Indebted Poor Countries (HIPC) Initiative. The World Bank and IMF are the driving forces behind the HIPC, and both recognize the efforts of Somalia’s government, thus beginning the process of qualification for the HIPC in March 2020. The HIPC helps numerous nations pair debt. Decreasing debt is pertinent for reducing poverty rates because the freedom from debt allows for spending on social services that support the most vulnerable citizens.

A country is qualified for the initiative’s assistance after a multi-step process. The country in question must be eligible for loans from the World Bank and IMF, have a track record of economic-reform policies, and have a Poverty Reduction Strategy Paper (PRSP). The nation in question then must meet the completion point. The HIPC grants additional economic relief that pares down debt without providing other loans to pay back. Somalia’s debt relief has not been easy to achieve. However, Somalia should reach the completion point soon, decreasing its debt from $5.2 billion to $500 million.

The IMF’s Staff-Level Agreement and Its Assistance

The IMF’s staff-level agreement for Somalia’s debt relief is another crucial step towards a more stable economy with decreased poverty rates. The next step is an agreement by the IMF’s executive board that authorizes releasing the $10 million to Somalia. The IMF’s mission chief Laura Jaramillo expressed the IMF’s confidence in Somalia and that the IMF is impressed by the continued economic recovery that Somalia has managed to accomplish. The new deal might not seem like much compared to the hopeful debt paring by the HIPC, but that relief will not likely reach Somalia until the end of 2023.

Assistance for Somalia’s debt relief would mean that Somalia can decrease the amount of its GDP that pays off the country’s debt, which is overwhelming. Spending so much on Somalia’s debt means the government has limited resources to tackle everyday problems, and $10 million from the IMF can be incredibly handy. The IMF’s new debt relief plan for Somalia indicates the growing confidence foreign investors have in Somalia, meaning more economic stability and debt relief might be on their way.

 – Clara Mulvihill
Photo: Flickr

Wheat Crisis in Lebanon

Wheat Crisis
Lebanon is facing a crippling economic crisis that forced more than three-quarters of its population into poverty, and the latest manifestation of this is its wheat crisis. Following the 2020 Beirut explosion, the country lacks any national reserves and relies on foreign imports for wheat. Before the conflict in Ukraine, the country imported approximately 80% of its wheat from Russia and Ukraine. Lebanon is currently struggling to find new markets that satisfy its wheat demand, given its low purchasing power amid the pandemic inflation.

Current Situation

Ever since the start of the war in Ukraine, Russia has blocked all Ukrainian grain exports via the black sea, resulting in a hefty surge in bread prices in Lebanon. Although Ukraine and Russia, through negotiations facilitated by the U.N., have signed an agreement expressing intent to restart grain exports, the deal’s legitimacy is in question as Russia attacked the Ukrainian port city of Odesa less than 24 hours following the initiation of the agreement. In fact, the offense pushed grain prices even higher.

According to the Lebanon Crisis Analytics Team at Mercy Corps, the price of wheat flour has increased by 209% since the beginning of the Russian invasion. The annual food and beverage inflation, which rose to a staggering 332% in June, exacerbates this. As of today, 22% of Lebanese households are food insecure.

International Aid

Lebanon has already received a $150 million loan from the World Bank to fund immediate wheat imports to provide poor and vulnerable households and other displaced populations with affordable food options. Lebanon’s Minister of Economy and Trade, Amin Salam, projects that the loan will cover food supplies for six to nine months. As the global price of wheat has been decreasing, Salam believes that the loan will most likely last for eight months. During this timeframe, Salam seeks to receive an additional $3 billion loan from the International Monetary Fund (IMF) as part of a promised package of support pending approval.

In addition to importing food, Lebanon also plans to build two new grain silos, which will cost approximately $100 million. According to Salam, several countries have already expressed interest in supporting the project, including Germany, the United States, France, the United Arab Emirates and Qatar.

The project received official approval following the technical feasibility study that the European Bank for Reconstruction and Development conducted. The current plan is to construct two grain silos north of Beirut in the Tripoli Port and the eastern Bekaa Valley. The new silos will be fully operational in around a year and will hold approximately 125,000 tons of grain, equivalent to nine months of reserves.

Building the new grain silos is a significant step forward for Lebanon’s crisis management. In addition to easing the pressure of wheat imports, which are expensive and at times slow, the silos also point to the beginnings of more organized economic planning, which might well lift the country out of its economic collapse.

– Emily Xin
Photo: Flickr

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Addressing the Looming Debt Default Crisis

Debt Default Crisis
The COVID-19 pandemic and the war in Ukraine have had countless consequences across the globe, namely public health emergencies and economic shutdowns. In many developing and low-income countries, one now sees what economists are calling a debt default crisis, which means that the economic burden of the pandemic and supply chain shortage has piled up so high on some countries that they are defaulting on their loans from foreign bondholders. A full-blown debt default crisis is dangerous because essential commodities and resources could become impossible to access in low-income countries, forcing many into poverty.

Debt Crisis Looms as Global Economy Worsens

Over the last six months, the number of emerging markets with sovereign debt and distressed trading levels has “more than doubled,” according to Bloomberg. This means that many low-income countries are trading and investing with money that they do not have, making these nations more vulnerable to debt crises. Debt default crises are particularly dangerous for low-income countries because the prices of necessary commodities such as food, fuel and medicine are skyrocketing due to inflation, interest rates are rising and job markets are failing. Economists point to 19 countries that house more than 900 million individuals who are particularly vulnerable to a debt default crisis, as well as a few countries that are already experiencing debt crises, including Sri Lanka and Lebanon.

Consequences of a Debt Default Crisis

Developing countries and emerging economic markets comprise about 40% of the worldwide GDP, which is part of the reason why a looming debt default crisis is worrisome to economists. Foreign bondholders are at risk of losing almost $240 billion if developing countries are unable to pay back their debts. Crushing international debt would be disastrous for not only low-income countries but developed countries as well.

The supply chain shortages could worsen, emergency health care responses could slow down and unemployment could rise. The international community is already seeing serious fallout from the debt default crisis in Sri Lanka, where disastrous fuel and food shortages are causing civil unrest.

Across low-income countries, hunger is increasing and millions more are at risk of falling into extreme poverty. Loan restructuring plans and international organizations are not working fast enough to prevent this devastation, hence the lack of essential emergency aid and foreign assistance.

Action from International Organizations

Shortly after the onset of the pandemic, the International Monetary Fund (IMF) and G20 established the Debt Service Suspension Initiative (DSSI) in anticipation that the pandemic would cause significant economic issues for low-income nations. This initiative provided about $13 billion of debt relief to close to 50 nations.

However, this short-term “safety net” drew to a close at the end of 2021, around the same time that many high-income countries, including the United States, significantly reduced their foreign COVID-19 aid. Additionally, G20 met again earlier in July 2022 to discuss potential plans of action to hold off a looming debt default crisis but failed to issue a communiqué after the summit. International leaders are struggling with cooperation because of the complicated relationship between Russia and Ukraine.

After the DSSI, the G20 developed the Common Framework for Debt Treatments, but it requires further refining to “provide meaningful relief to countries that need it.” The World Bank and IMF have provided guidelines in this regard.

Moving Forward in a Debt Crisis

Many low-income countries are approaching a debt default crisis, which would cause a perfect storm of economic hardships including inflation, higher interest rates and slowed job markets. International organizations like the IMF and G20 need to prioritize loan restructuring plans so that the global economy does not suffer from the loss of $240 billion. High-income countries like the United States can play a more significant role by prioritizing foreign aid to minimize devastation from the COVID-19 pandemic. Amid the fallout from the pandemic and the supply chain issues from the war in Ukraine, international leaders can take prompt and effective action to avoid a devastating debt default crisis.

– Ella DeVries
Photo: Flickr

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How Digital Payments Can Aid Afghanistan’s Humanitarian Crisis

Afghanistan’s Humanitarian CrisisAfter nearly two decades, the Afghanistan War ended in August 2021, when United States forces evacuated the country. For the nearly 40.9 million Afghans left behind, the rippling impacts of the war have created a devastating crisis. Afghanistan’s humanitarian crisis has made nearly every aspect of life take a turn for the worst under the rule of the Taliban. Crucially, this includes economic struggles, which then affect access to food and healthcare.

Part of the reason for the harsh and sudden economic downturn for Afghanistan came as a result of the Taliban’s takeover in August 2021. Since then, most foreign aid has been revoked, including from sources such as:

  • The United States
  • The World Bank
  • The International Monetary Fund
  • The Asian Development Bank

As a result, nearly $2 billion in aid has been stopped, causing the economy to collapse, as prior to this, Afghanistan was nearly dependent on foreign aid.

Humanitarian Crisis

The economic collapse was the result of multiple failures or setbacks Afghanistan faced in recent years. Drought, the COVID-19 pandemic and conflicts all came to a head with the Taliban takeover. Food insecurity has been at the forefront of the humanitarian crisis plaguing the Middle Eastern country.

According to the World Food Programme, 95% of Afghans are food insecure as of January 2022. Drought and rising food prices in the last year have increased the severity of food insecurity, which is now up 14 points from 81% the year before.

Food insecurity isn’t due to a lack of food in the country and is rather due to a lack of economic security. As of 2020, 85% of Afghans did not have a bank account. In the current crisis, humanitarian aid is not enough. Afghans need access to secure finances to lift themselves out of poverty and to allow them to purchase food and other necessities.

However, Afghanistan’s Central Bank’s credentials are not recognized internationally, which essentially renders it useless as a financial institution. This is a security measure, as there are fears that the Taliban could use any money for their own purposes. However, the group Human Rights Watch writes of a way to legitimize the Central Bank without giving funds indirectly to the Taliban, in a practice called “ringfencing.”

A Human Rights Watch article stated the ways to protect money going into Afghanistan. By “(ensuring that bank leaders have sole and independent authorities and credentials), put in place independent auditors to monitor the bank’s transactions internationally and domestically and ensure that assets made available are being used for legitimate central banking functions and humanitarian and commercial purposes.”

Measures to ease the burden of the economic crisis will go a long way to aid Afghanistan’s humanitarian crisis.

Digital Payments

One creative attempt to relieve the financial woes felt by Afghans is the use of digital payments. The Center for Global Development released a brief in May 2022 on the potential impact of digital payments on Afghanistan’s humanitarian crisis.

Digital payments do not include cryptocurrency, though it doesn’t exclude the possibility. They work similar to apps like Venmo or CashApp, where money goes directly to consumers and then to the places they do business. The rise of technology like QR codes has made digital payments even more accessible.

In a country similar to Afghanistan, digital payments are seen as a way to alleviate economic hardship without inadvertently giving money to the Taliban, or paying the Taliban to regulate financial institutions. Instead, security measures including biometric data on smartphones or customer due diligence protocols. The protocols are already in place for digital payments used by non-governmental organizations (NGOs), which often utilize digital payments for salaries in the countries they operate in.

The benefit of digital payments is the traceability, unlike bank notes. However, one potential disadvantage is that many Afghan women do not have access to smartphones or are illiterate, which would be a greater barrier to the effective use of digital payments.

There are various digital payment platforms that have already shown success. Fintech for International Development partnered with several NGOs to launch “Lotus20”, which had a successful pilot program in Kenya. In Afghanistan, the platform seeing success is “HesabPay”, which has partnered with more than 4,000 Afghan merchants to accept digital payments.

A Look Ahead

Afghanistan’s humanitarian crisis is rapidly growing and will continue to get worse. There are a plethora of other issues contributing to the total devastation and yet so many can be traced back to economic pitfalls. Digital payments have the potential to help Afghans regain control of their finances and lives in a time of near constant crisis.

–Emma Rushworth
Photo: Wikimedia Commons

Bitcoin in Argentina

Bitcoin in Argentina
Economic consequences from the COVID-19 pandemic and supply chain shortages have ramped up inflation in Argentina to record levels. At its peak, economists estimated that inflation in Argentina reached a 60% increase since the beginning of the pandemic. The rapid deflation of the peso pushed about 37.7% of the population of Argentina below the poverty line by significantly reducing their purchasing power, signaling a serious economic crisis. The adoption of bitcoin in Argentina is helping people to fight against inflation and poverty.

Bitcoin in the Developing World

In recent years, many developing nations have turned to bitcoin for a couple of different reasons. First, bitcoin is decentralized, meaning that international organizations like the International Monetary Fund (IMF) do not regulate it. Second, bitcoin is highly effective at containing inflation and is a relatively steady asset as opposed to standard market investments and savings.

The cryptocurrency penetration rate in Argentina has reached 12%, Cointelegraph reported. This is more than double most other countries in Latin America. Due to the success of bitcoin in Argentina, the central bank motioned to forbid financial institutions from operating with digital assets.

The IMF and the World Bank claimed that cryptocurrency in developing countries is dangerous, because it opens doors for money laundering and economic volatility, according to Politico. Bitcoin is also an environmental hazard. “If Bitcoin were a country, it would be among the top 30 energy users in the world,” Foreign Policy reported. This means that as bitcoin increases in popularity around the world, it could harm the environment and worsen changing weather patterns.

The Key to Sustainable Global Development

Many economists believe that bitcoin and other forms of cryptocurrency hold the key to sustainable global development. This would be particularly beneficial to the world’s poorest nations and communities. Decentralized finance allows people to build entire financial ecosystems without intervention from world banks, according to Foreign Policy. Because of decentralized financial blockchains, people across the world have broader access to capital and can easily and securely transfer money.

People in the developing world usually experience exclusion from modern cryptocurrency systems due to their technological complexities and the necessity of online financial literacy. Because of this, the expansion of bitcoin in Argentina and other developing nations marks a victory in the fight against global poverty.

One of the greatest advantages that bitcoin offers to a country like Argentina is that it can provide a “financial identity” to people who have not had access to financial institutions like banks. As of 2022, 1.7 billion people across the world lack access to modern financial services, according to Foreign Policy. Therefore, providing access to financial assets is a priority in the fight for global development.

Bitcoin as a Method of Reducing Poverty and Inflation

The success of bitcoin in Argentina and other developing nations is catching attention around the world, particularly from the federal governments of rich countries like the United States and global organizations like the IMF. The IMF and the World Bank are actively working to prevent countries like Argentina from adopting bitcoin as a legitimate form of national currency. However, their efforts are failing because multiple countries in the Central African States, as well as El Salvador, have already motioned to adopt Bitcoin as a national currency, according to Politico.

While Argentina has not yet officially adopted bitcoin, the nation is experiencing significant economic growth and optimism for the reduction of the alarmingly high poverty rate. As economic complications from the pandemic and global conflicts increase, many countries in the developing world are finding significant successes in financial systems that have traditionally only benefitted rich nations.

– Ella DeVries
Photo: Flickr

Ireland’s Housing Crisis Driving Millions Into Poverty

Ireland's Housing Crisis
Ireland is suffering from the “longest and most severe” housing crisis the country has ever experienced according to Macdara Doyle, an advocate for housing reform in Ireland. Ireland’s housing crisis has pushed millions of people out of their homes and into poverty with seemingly no end. Irish housing prices and evictions are through the roof, but Raise the Roof, Doyle’s non-governmental organization is pressuring the government to energize its campaign to combat this crisis.

What Caused Ireland’s Housing Crisis?

Ireland’s housing crisis has been in the making since the late 2000s when the international housing bubble burst. Due to the burst in Ireland, it became evident that there was a growing lack of suitable and affordable rental living spaces.

The housing market has been unable to keep pace with Ireland’s population growth and urban concentration. There are rough estimates that to keep pace with the population growth and job density in cities, particularly in Dublin, there must be 45,000 new houses built a year. Unfortunately, the average annual number since 2015 has been 15,000. The cost of building materials has remained high since the early 2000s. Worse, the housing bubble exacerbated the costs for housing materials and has made it almost impossible to build houses at all, much less any new affordable housing.

After the housing bubble burst, Ireland’s government faced countless economic problems that left the government scrambling to support its recently unemployed and/or homeless population. Therefore, the Irish government took out loans from the International Monetary Fund (IMF) and the European Union (EU). The funds went to support the workers who lost their jobs in the 2008 recession. Unfortunately, not much went towards the housing crisis itself. It has now returned to haunt the country as both prices and poverty rates skyrocket.

How is Ireland’s Housing Crisis Impacting Poverty?

Ireland’s housing crisis has already forced thousands of citizens into poverty and is putting even more at risk of falling into poverty. As of May 2022, just about 20% of Ireland’s population live below the poverty line, and 41.6% of Irish renters risk falling into poverty. That is 952,185 people, just short of a million Irish citizens. Perhaps the most disturbing data point is the 59.1% poverty rate of Irish on rental subsidies after they pay their rent.

The housing subsidies program most widely used in Ireland is the Housing Assistance Payment (HAP). About 20% of private renters receive HAP subsidies. However, a 2022 “Housing Costs and Poverty 2022” report suggests that HAP subsidies are insufficient. It determined that instead of subsidizing the private rental sector, HAP should support the building of social homes. As it states, “It is essential that Government increase spending on actually building social homes instead of relying on and subsidising a dysfunctional private rented sector.”

What is Happening to Fix the Housing Crisis?

Local non-government organizations (NGOs) and the Irish government are putting some small movements and policies in place to end Ireland’s housing crisis. Understandably, these efforts have the public’s growing support. One solution with incredible support is a policy plan that Ireland’s government outlined, and the second is from an NGO: Raise the Roof.

Ireland’s government recently proposed that one of the best ways to raise funds to combat the housing crisis is to change the taxes on the currently empty housing properties with a vacant property tax. The tax will incentivize people to use vacant properties and provide more affordable housing. The Geodirectory database estimates more than 112,000 decrepit or vacant dwellings in the last quarter of 2021.

Raise the Roof advocates that the government doubles its investment to fight the housing crisis. It supports the idea of a vacant property tax. It also suggests introducing a rent freeze. Raise the Roof is generating pressure with almost non-stop public meetings to discuss the issues blocking the Irish government’s ability to end its decade-long housing crisis. Numerous unions and community organizations support the Raise the Roof platform.

Hopefully, Raise the Roof will spur the Iris government’s new sense of urgency to combat Ireland’s housing crisis.

– Clara Mulvihill
Photo: Flickr

Leaders of Sudan’s Military Coup Prepare for Negotiations

Sudan’s Military Coup
Rival parties within Sudan are preparing to meet for the first time since October 2021, when the coup that continues to spark violence in the country took place. The political divide and often violent conflicts have worsened the state of poverty in an already struggling Sudan — Sudan’s poverty rate stood at 55.9% in 2021. The negotiating committee will consist of Sudanese military officials, political leaders representing opposing parties, and civilian leaders, with hopes to persuade the leaders of Sudan’s military coup to dampen the conflict in the country and reach some sort of compromise, which would ideally pave the way for government and foreign aid for the impoverished people of Sudan.

Origins of the Coup

In 2021, the Sudanese military carried out a coup that ousted its civilian partners in power. A transitional government had been put in place ever since protests in 2019 forced former President Omar al-Bashir to step down as leader of the country. This transitional government split power between the military and civilian leaders and was meant to last until the 2023 elections when the country would elect a new leader. However, just two years into this period, the military seized control, stating that it would take over until those planned elections.

Despite these claims, it is unclear whether the military will actually step down from power at that point. The commander-in-chief of the Sudanese armed forces, Abdel Fattah al-Burhan, also issued a nationwide state of emergency when the military seized power, tightening the military’s grip on many everyday processes in Sudan.

The Coup’s Impact

Sudan’s military coup took place at an already tumultuous time for the country. The political structure in Sudan was fragile before any of these events, and it remains the same. The issue of whether or not the military will relinquish power in time for the elections hangs over the entire country. The coup’s occurrence has sparked protests against the military’s actions, with many organizations and activists urging civil disobedience. These protests have become violent, with 98 deaths during demonstrations, not to mention the large number of people detained for protesting as well, as of June 2022.

The economy of Sudan was already struggling before the takeover took place, but the situation has worsened. The military controls many corporations in numerous industries responsible for much of the flow of money in the country. This grip on these corporations has sparked hesitancy among international traders, including the United States, to conduct business with Sudan.

The U.S. condemns the military’s actions — in October 2021, the U.S. suspended a $700 million in aid to Sudan and stopped a 400,000-ton shipment of wheat scheduled for Sudan to receive later in 2022. In addition, around the same time, the World Bank and the International Monetary Fund (IMF) froze $2 billion in aid destined for Sudan.

Negotiations and the Way Forward

Since early 2022, the United Nations and various other international organizations have attempted to negotiate with the leaders of Sudan’s military coup, but to little avail. However, Sudan’s rival parties are now preparing to talk for the first time since 2021, providing hope for a way forward. On May 29, 2022, Burhan lifted the nationwide state of emergency, a necessary step in the right direction.

Assuming these talks go well, the 2023 elections will take place as scheduled and Sudan will vote for a new leader to take charge. Civilian and political leaders of Sudan hope to put an end to the violent protests, with many detained individuals from such protests recently released, another positive sign. If the military loosens its grip and the election takes place, aid will again begin to flow into the country, which Sudan desperately needs.

An organization still working to provide aid to Sudan is the Sudan Relief Fund, a nonprofit organization established in 1998, with the mission of providing impoverished Sudanese and South Sudanese people with food, water, shelter and medical attention. In 2019, the organization was able to distribute more than $3.3 million in aid and it has continued to assist during the military takeover.

All in all, it appears that Sudan is moving in the right direction, but only time will tell. In the meanwhile, organizations are working on the ground to assist struggling Sudanese people.

– Thomas Schneider
Photo: Flickr

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Everything to Know About Poverty in Lebanon

Everything to Know About Poverty in Lebanon
It has been almost three years since Lebanon, previously labeled as the “Switzerland of the Middle East,” began to slowly drown in poverty. As the ESCWA report stated, 82% of the Lebanese and non-Lebanese population lives in multidimensional poverty while 40% of them live in extreme multidimensional poverty. Those numbers result from an unprecedented economic crisis that started in October 2019 and kept on worsening with the COVID-19 outbreak, the Beirut Port explosion, the ongoing corruption and the war in Ukraine. Here is everything to know about poverty in Lebanon.

Health Care

One of the most important and dangerous symptoms of the poverty increase in Lebanon is the degradation of the health care system. The Lebanese lira has lost more than 90% of its value since 2019, making it impossible for many health care professionals (nurses and doctors) to live decently with their salaries, thus leading them to leave the country for better opportunities abroad. In addition to that, the country imports many medical care products and medicines, leading to a huge increase in their prices, making them unaffordable for many. Lebanon has the means to produce its drugs, an action that the actual government is encouraging while it still needs time before being fully implemented.

Public Utilities and Food Security

Another dimension to know about poverty in Lebanon is the lack of public utilities available to the people. The most famous, touching a majority of people, is the lack of electricity the state provides, forcing the Lebanese people to reach out to owners of private generators to have a few hours of electricity a day. However, this alternative has a considerable cost to Lebanese households. The fuel that powers the generators comes from abroad, requiring payments in USD and making it impossible for many to subscribe to this service amidst the severe economic crisis the country is going through.

A more recent issue Lebanon must face as a result of the War in Ukraine is the wheat crisis and with it a risk of shortage in bread production. The country imports more than 60% of its wheat from Ukraine. The urgency of this new issue also depends on the government’s capacity to secure enough quantities before any increase in the price of wheat.

Education

The numerous challenges Lebanon has faced over the past three years have also had their effect on education. According to UNICEF, 260,000 Lebanese children risk interrupting their education. Whether it is the COVID-19 pandemic that forced the students to stop their studies because of the lack of means to pursue them online, the destruction of some schools in Beirut after the port explosion and the economic crisis forcing some schools and universities to increase their tuitions making them unaffordable for many.

Efforts to Help Lebanon

A year ago, the World Bank approved a $246 million project to provide 147,000 households with basic needs as well as cash transfers. More recently, the International Monetary Fund (IMF) reached an agreement of $3 billion with the Lebanese government to help Lebanon get out of the crisis. On another note, local NGOs are playing an important role in helping people in need. Private actors are also taking initiatives to benefit from this situation, by enhancing made in Lebanon products, thus relying less on imports.

Hence, having presented everything to know about poverty in Lebanon, shows clearly that the country is not in its best phase. However, hope is always there with small steps taken towards a better future and especially with a young generation who is learning from the mistakes of the older. Helping Lebanon is therefore helping a country full of potential and showing once again that it will rise despite all.

– Youssef Yazbek
Photo: Flickr

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Addressing Poverty Reduction in Costa Rica

Poverty Reduction in Costa Rica
The recent COVID-19 pandemic greatly impacted the economic stability of Central America’s wealthiest country and caused a resurgence in poverty. As a result, poverty reduction in Costa Rica has become an important goal for the country. Many know Costa Rica for its lush rainforests and beaches, universal healthcare system and environmental activism. However, since the pandemic began, thousands of small businesses have shut down due to low demand. The decreased income levels led many families to live below the poverty line. According to UNICEF, one in three children under 18 years of age in Costa Rica now lives in poverty. Poverty reduction in Costa Rica is necessary to create a healthier population throughout the country.

Economic Reform

While Costa Rica displayed steady economic growth in the past three decades, the recent pandemic impacted that trajectory. The current goals of economic reform in the country are to address fiscal imbalances while decreasing income inequality and distribution. According to President Alvarado Quesada, Costa Rica plans to accomplish this by strengthening social assistance programs. These social assistance programs aim to promote greater formalization and support female labor force participation. The International Monetary Fund (IMF) is also aiding in economic recovery through a $1.7 billion arrangement. These assets will aid the country in improving public funding for subsidies to individuals the pandemic has heavily affected.

The government is seeking to continue decreasing income inequality through educating more children and adults, which could create long-term growth. Currently, the literacy rate in Costa Rica is high at 97.9%, but there is still a large gap in income inequality. In 2019, Costa Rica’s richest individuals held approximately 53.7% of the country’s income. The country will reduce poverty and income inequality by creating infrastructural reforms to streamline regulations and complete trade commitments, foreign direct investment and natural resources preservation. Increasing opportunities for females within the labor market is also vital to improving income inequality. In 2019, females made up 40.5% of the total labor workforce. This can improve through social assistance programs aimed at hiring females for jobs.

Tourism’s Effect on Poverty

In 2019, Costa Rica’s tourist industry represented 8.5% of gross domestic product and employed 9% of the population. However, in 2021, Costa Rica’s government estimates that the industry will only be worth approximately 3.5% of GDP and will decrease by approximately 100,000 jobs. In 2020, poverty in Costa Rica reached 26.2% of families, the highest level in 30 years due to the impact of the COVID-19 pandemic. About 45% of the working-age population is in a condition of informal employment. In other words, they perform jobs without being registered or contributing to taxes and social security. Many of these informal positions relied on tourism such as the restaurant, hotel and excursions industries. With a lack of job security, individuals with these informal jobs were the first people that layoffs impacted.

COVID-19 Vaccines

Moving past the COVID-19 pandemic is necessary to restore the livelihoods of many Costa Rican people in poverty. To do this, the country is focusing on vaccinating low-income individuals. Earlier in 2021, rather than creating stringent lockdowns, the Costa Rican government imposed restrictions on vehicle mobility and limited business hours and capacity. The country also requires COVID-19 vaccinations for people to enter most commercial centers and participate in many public activities. Fortunately, the latest vaccination rates show 82% of all Costa Ricans ages 12 and older have received at least one COVID-19 vaccine dose.  Travelers to Costa Rica must show proof of vaccination or a negative COVID-19 test in order to enter the country. These requirements can lead to a rapid return to tourism levels which will aid the country in returning to economic stability.

Moving Forward

With continued adherence to precautionary COVID-19 safety measures, individuals in Costa Rica can greatly protect public health. Meanwhile, the new social assistant programs promise to greatly assist in bringing about poverty reduction in Costa Rica.

– Robert Moncayo
Photo: Flickr