Arab Currencies Crash Due to Gov’t Mismanagement, External Pressures

Date: 25 January 2023 - 21:53

News ID: ۱۱۱۷۴۰

CAIRO (Al Jazeera/AP) – “I cannot feed bridges to my children,” says Muhammad, a driver living in the Nile Delta, in reference to the Egyptian government’s large infrastructure building drive, as the country suffers from a cost-of-living crisis.
“I can hardly afford the most basic necessities. This government has been in power for over eight years. They have done nothing for the average person,” he said angrily.
“This government treated me [when I had] the hepatitis C virus for free,” retorted his friend, Sami, referring to a campaign launched by the Egyptian government in 2014 to treat people living with hepatitis C virus (HCV), one of Egypt’s biggest health challenges.
These heated discussions over inflation and currency devaluations have become commonplace in many Arab countries.
The Iraqi dinar has lost 7 percent of its value since mid-November, leading to the sacking of the central bank governor on Monday.
In September, the Tunisian dinar reached a record low versus, as the country’s president struggles to deal with an ongoing economic and political crisis.
Meanwhile, the currencies of other countries, including Syria, Sudan, Lebanon and Egypt, were among the world’s worst-performing currencies in 2022.
These devaluations, coupled with rising prices around the world, have contributed to sky-high levels of inflation.
According to the Central Bank of Egypt, headline inflation was 21.3 percent in 2022, while core inflation, which excludes volatile fuel and food prices, reached 24.5 percent.
Some people are blaming their governments for inflation. Governments, on the other hand, have tended to point the finger at external factors beyond their control, such as the war in Ukraine, the COVID-19 pandemic and interest rate hikes in the U.S.
Several countries in the region, such as Egypt, Jordan and Lebanon, have suffered from a depletion of foreign currency, due to plummeting tourism revenues caused by the COVID-19 pandemic, as well as rising food prices triggered by the war in Ukraine.
Currency devaluations are a result of a number of factors, including trade deficits and foreign debt.
“A persistent trade deficit results in a loss of foreign reserves which is often necessary to service foreign lending,” said Dennis McCornac, assistant professor of economics at Georgetown University in Qatar.
On Wednesday, hundreds of protesters rallied near the Central Bank in the Iraqi capital, Baghdad, angered by the recent devaluation of the Iraqi dinar and demanding the government take action to stabilize the currency.
The protesters — mainly young people — rallied amid a heavy security presence, with many carrying the Iraqi flag and banners with slogans. One slogan read: “The politicians are the ones covering up the financial corruption for the banks.”
Iraq’s Prime Minister Mohammed Shia al-Sudani on Monday accepted the resignation of the governor of the country’s Central Bank, Mustafa Ghaleb Mukheef, following a weeks-long plunge of the Iraqi dinar. Mukheef, who had been in the post since 2020, was replaced by Muhsen al-Allaq as acting governor.
Some politicians in Iraq have blamed the drop on recent measures by the U.S. Treasury.
The U.S. has significant control over Iraq’s supply of dollars as Iraq’s foreign reserves are held at the U.S. Federal Reserve. Late last year, the Federal Reserve began imposing stricter measures on transactions, which have slowed the flow of dollars into Iraq, including blacklisting a number of banks from the dollar market over suspected money laundering.