Gov’t Mismanagement or External Pressures: What to blame for Arab currencies crashing
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Roshan Amiri
- . January 25, 2023
- . Update: January 26, 2023 2:49 pm
“I cannot feed bridges to my children,” a driver living in the Nile Delta said, in reference to the Egyptian government’s ambitious megaprojects, as the country suffers currency devaluation, rising inflation, and the eventual, cost of living crisis.
“This government has been in power for over eight years. They have done nothing for the average person.”
Such similar heated discussions have become commonplace in several Arab countries. Since mid-November, the Iraqi dinar has lost 7% of its value, leading to the country’s Central Bank governor getting replaced on Monday. Amid an ongoing economic and political crisis, the Tunisian dinar reached a record low versus the US dollar in September.
Meanwhile, the currencies of Syria, Sudan, Lebanon, Egypt, and several other countries, were among the world’s worst-performing currencies last year. These devaluations, along with rising prices across the globe, have together contributed to sky-high levels of inflation.
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While some people are blaming their governments for the emergency, the latter have instead tended to point the finger at external pressures beyond their control, such as interest rate hikes in the US, the deadly war in Ukraine, and the ongoing pandemic.
Rising inflation around the world has caused the US Federal Reserve to raise interest rates in order to control rising prices. But the effect of chronic structural problems cannot be undermined. Moamen Gouda, professor of Middle East economics at Hankuk University, agrees with other economists that the main problem with the Egyptian economy is structural.
According to him, US interest rate hikes and the war in Ukraine only brought the fragility of the economic systems of several countries in the region into the limelight and highlighted the need to embark on painful structural reforms.
