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Restructuring Libya’s finance and economy

Giancarlo Elia Valori

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Last August the Libyan Investment Authority (LIA) moved its Tripoli’s offices to the now famous Tripoli Tower.

The traditional financial institution of Gaddafi’s regime currently manages approximately 67 billion US dollars, most of which are frozen due to the UN sanctions.

Said sanctions shall be gradually removed and replaced with a system of market controls, as the Libyan economy finds its way.

Right now that, after intimidation and serious and often armed threats, LIA has moved to the safer Tripoli Tower.

However, how was LIA established and, above all, what is it today? The Fund, which has some characteristics typical of the oil countries’ sovereign funds, was created in 2006, just as the EU and US economic and trade sanctions against Gaddafi’s regime were slowly being lifted.

The idea underlying the operation was simple and rational, just like the one that had long pushed Norway to create the Government Pension Fund Global, i.e. using the oil profits to avoid the post-energy crisis in Libya and preserve the living standards of the good times.

Hence investing in its post-oil future using the huge surplus generated by the crude oil sales.

From the beginning, LIA had to manage a portfolio of over 65 billion US dollars, but with three policy lines: firstly, 30 billion dollars to be invested in bonds and hedge funds; secondly, business finance and thirdly, the temporary liquidity secured in the Central Bank of Libya and in the Libyan Foreign Bank.

The funds of those two banks soon acquired a value equal to 60% of all LIA assets.

All the companies having relations with foreign markets, from Libya, fell within the scope of the Libyan Investment Fund.

Currently LIA has over 552 subsidiaries.

Nevertheless, there are no documents proving it with certainty. To date there are not even archives that credibly corroborate the LIA budgets and statistics.

Since 2012 it has not even undergone any auditing activity.

There were and there are no strategies for allocating investments nor a plan. The only criterion followed by the Fund managers – now as in the past – is to invest the maximum sums of money in the shortest lapse of time.

The first serious audit was finally carried out by KPMG in June 2011, in the heat of the battle for the survival of Gaddafi’s regime.

At the time, high-risk derivatives transactions were worth as much as 35% of LIA’s total investments – which was incredible for the other global funds.

According to the most secret but reliable sources, however, in 2009 the losses of the Libyan Fund exceeded 2.4 billion US dollars.

What happened, however, in 2011, after the collapse of Gaddafi’s regime? How did LIA and the Libyan African Investment Portfolio (LAIP) act?

In fact, neither company could carry out any operations.

In 2014 alone, LIA’s losses were at least 721 million US dollars.

Moreover, LAIP still holds in its portfolio the Libyan Arab African Investment Company (LAICO), which manages investments –  particularly in the real estate sector – in 19 African countries, with specific related companies in Guinea Bissau, Chad and Liberia.

Furthermore, Oil-Libya still operates as a network manager and extractor in at least 18 African countries.

On top of it, the Libyan Fund still owns Rascom Star, a satellite and telephone network connecting much of rural Africa.

Within LAIP there is also FM Capital Partners LTD, another real estate Fund.

Nevertheless, as early as the collapse of Gaddafi’s regime, the internal policy lines of LIA and of the other companies separated: 50% of managers wanted to continue the activity according to the classic rules of the Company’s Management, while the others thought they should mainly follow the new political equilibria within Libya.

The last audit carried out by Deloitte also demonstrated that the over 550 subsidiaries were the real problem of the Fund.

Deloitte also assessed that at least 40% of those companies were completely uneconomic and had to be sold quickly.

In this bunch of lame ducks there were, for example, the eight refineries – one of which managed by Oil invest in Switzerland – which also paid penalties to the Swiss government for obvious environmental reasons.

Allegedly the refinery in Switzerland stopped its activities in 2017.

The traditional investment line of the Libyan Arab Foreign Investment Company (LAFICO) has always been linked to LIA, which currently has over 160 billion US dollars avaialble, including oil, personal income and old foreign investment of Colonel Gaddafi, once again only partially reported to international authorities.

Moreover, according to the LIA managers of the time, the various companies within the Fund did not communicate one another and hence their strategies overlapped.

And the same held true for the interests of their different political offspring.

Moreover, in 2011 an old independent audit showed that the losses before the sanctions that preceded the uprisings amounted to approximately 3.1 billion US dollars.

Gaddafi’s regime started to collapse – a regime which, according to the international narrative, had allegedly accumulated all the money taken by LIA and its subsidiaries.

Obviously this is not true – exactly as it is not true that the “deficit” in Italy’s public finances before the “Bribesville” scandal was caused only by the greed and voracity of the ruling class.

In the countries where there is a destructive psywar and an offensive economic war, these are now the usual models.

It is not by chance that on December 16, 2011 the UN Security Council lifted the specific sanctions against the  Central Bank of Libya and the Libyan Foreign Bank (which is not LAFICO) because they had supported the uprisings against Colonel Gaddafi.

In 2014 LIA initiated legal proceedings against Goldman Sachs, which cost it 1.2 billion US dollars, with a bonus for the intermediary bank of 350 million dollars.

The proceedings ended in 2016 and the British judges decided in favour of Goldman Sachs that was entitled to a compensation amounting to one million US dollars.

There was also another legal action brought against Société Générale, which had started in 2014 and later ended with LIA’s partial defeat.

As to the 2018 national budget, for example, the Central Bank of Libya has envisaged the amount of 42,511 billion dinars, broken down as follows: 24.5 for salaries and wages; 6.5 billion dollars for petrol subsidies and 6.7 billion dollars for “other expenses”.

On average the dinar exchange rate is 1.3 as against the dollar, but it is much lower on the black market.

And public spending is all for subsidies and salaries. Very little is spent for welfare – that was Colonel Gaddafi’s asset for gaining consensus. Social wellbeing can be achieved with good stability of oil prices and revenues, which is certainly not the case now.

Moreover, General Haftar militarily conquered the oil sites of the Libyan “oil crescent” on June 14, 2018, after having held back the attacks of the Petroleum Defence Guards of Ibrahim Jadhran, the commander of the force protecting the oil wells and facilities.

According to General Haftar, the condition for reopening wells, as well as storage and transport sites, was the replacement of the Governor of the Central Bank of Libya, Siddiq al-Kabir, with his candidate, namely Mohammad al-Shukri.

Siddiq al-Kabir stated that the Central Bank of Libya has lost 48 billion dinars over the last 4 years and rejected the appointment – formally made by the Tobruk-based Parliament – of his successor, al-Shukri.

Moreover, Siddiq al-Kabirhas also been accused of having pocketed a series of Libyan public funds abroad.

Later General Haftar attacked the Central Bank of Libya in Benghazi to collect funds for the salaries of his soldiers.

Hence the current Libyan financial tension lies in the link between banks and oil revenues – two highly problematic situations, both in al-Serraj’s and in the Benghazi governments, as well as in General Khalifa Haftar’s ranks.

It is certainly no coincidence that the Presidential Council decided to impose a 183% tax on currency transactions with banks.

In addition, taxation was introduced on the goods imported by companies before the current tax reform, which is linked to the reform of the allocation of basic commodities to the Libyan population.

The idea is to stabilize prices and hence make the exchange rate between the dinar and the dollar acceptable, which is another root cause of the economic crisis.

The Libyan citizens often demonstrate in front of bank branches, which are constantly undergoing a liquidity crisis. Prices are out of control and the instability of exchange rates harms also oil transactions, as can be easily imagined.

Nevertheless, even the area controlled by the Tobruk-based Parliament and General Haftar’s Forces is not in a better situation.

In fact, Eastern Libya’s banking authorities have already put their banknotes and coins into circulation, which are already partly used and were printed and minted in Russia.

Pursuant to al-Serraj’s decision of May 2016, said banknotes are accepted in the Tripoli area.

Four billion dinars, with the face of Colonel Gaddafi portrayed on them, and of the same dark colour as copper.

According to the most reliable sources, the reserves of the Central Bank of Libya in Bayda – the city hosting the Central Bank of Eastern Libya – are still substantial: 800 million dinars, 60 million euros and 80 million dollars.

Not bad for an area destroyed by war.

Obviously the simple division into two of the Central Bank – of which only the Tripoli branch is internationally recognized – is the root cause of the terrible Weimar-style devaluation of the Libyan dinar, which, as always happens, they try to patch up with the artificial scarcity of the money in circulation.

As Schumpeter taught us, this does not solve the problem, but shifts it to real goods and services, thus increasing their artificial scarcity and hence their cost.

Meanwhile, the economic situation shows some signs of improvement, considering that the 2017 data and statistics point to total revenues (again only for Tripoli’s government) equal to  22.23 billion dinars, of which 19.2 billion dinars of oil exports; 845 million dinars of taxes; 164 million dinars of customs duties, above all on oil, and 2.1 billion dinars of remaining revenue.

At geopolitical level, however, the tendency to Libya’s partition – which would be a disaster also for oil consumers and, above all, for the Libyan economy, considering that the oil crescent is halfway between the two opposing States – is de facto the prevailing one.

Egypt openly supports General Khalifa Haftar and the tribes helping him.

The Gharyan tribe and many other major ones, totalling 140, now support the Benghazi Government, since at the beginning of clashes, they had often been affiliated to Tripoli and its Government of National Accord.

Tunisia has always tried to reach a very difficult neutral position.

Algeria strongly fears the intrusion of the Emirates’ and Qatar’s Turkish intelligence services into the Libyan economic, oil and political context, but it endeavours above all to limit the Egyptian pressure to the East.

The European powers support General Haftar- with France that, as early as the first inter-Libyan fights, sent him the  Brigade Action of its intelligence services. Conversely, Italy is rebuilding its special relationship with al-Serraj’s government – like the one it had with Gaddafi – but with recent openings to General Haftar.

If we want to reach absolute equivalence between the parties, we must avoid doing foreign policy.

Great Britain and the United States tend to quickly withdraw from the Libyan region, thus avoiding to make choices and not tackling the economic and social crisis that could trigger again a war, with the jihad still playing the lion’s share and precisely in the oil crescent.

The United States should not believe that its great oil autonomy, which also pushes it to sell its natural gas abroad, can exempt it from developing a policy putting an end to the unfortunate phase of the “Arab Springs” it had started – of which Gaddafi’s fall is an essential part.

Currently the Libyan production share is around 1% of the total OPEC production.

Everyone is preparing for the significant increase of the oil barrel price, which is expected to reach almost 100 US dollars in the coming months.

If this happened – and it will certainly happen – the Libyan economy could be even safe, but certainly corruption and the overlapping of two financial administrations and two central banks, as well as political insecurity, could still stop Libya’s economic growth.

Hence, for the next international conference scheduled in Palermo for November 12-13, we would need a common economic and financial policy line of all non-Libyan participants to be submitted to both local governments.

Probably General Haftar will not participate – as stated by a member of the Tobruk-based Parliament – but certainly Putin will not participate.

The presence of Mike Pompeo is taken for granted, but probably also the Russian Foreign Minister, Sergey Lavrov, will participate.

Certainly the Italian diplomacy focused only on “Europe” has lost much of the sheen that has characterized it in Africa and the Middle East.

Meanwhile, we could start with a working proposal on the Libyan economy.

For example, a) a European audit for all Libyan state-run companies of both sides.

Later b) the definition of a New Dinar, of which the margin of fluctuation with the dollar, the Euro and the other major international currencies should be established.

Some observers should also be involved, such as China.

Furthermore, an independent authority should be created, which should be accountable to the Libyan governments, but also to the EU, on the public finances of the two Libyan governments.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Economy

Kleptocracy Under Democracy

Syed Nasir Hassan

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Power comes with dire consequences if it is misemployed. Great minds orchestrate a great nation but a corrupt mind razes it as personal gain pollutes honor and pride. Ruler of a country clasps great amount of power. On a stork of a pen destiny of people can be changed. However what if that pen is in hands of an amoral mind.

Across the globe reverberates of democracy can be heard. But the question still remains that is there is an actual democratic world order or are we just modern slaves being exploited by the power, wealth and technology.

A quite basic and easily comprehendible understanding of how democracy works is that it sows the seed where transparency and mutual benefit can grow and people become the one who are torch bearers. Society grows as a collective unit in a democratic order. Emancipation of people is prime concern in the democratic society and they are catered at every level.

Whereas kleptocracy, derived from a Greek word “klept” which means steal or thieve, is a form of government where corrupt rulers exploit the resources and population for personal gains or uses state resources to enrich themselves. In order to increase personal wealth corrupt leaders maneuver any means at their disposal indulging themselves in committing more crimes.

However with the advancement in globalization and spread of dubious democratic norms across the globe have made things worse, not realizing that one size doesn’t fit all. Systems are changing, absolute democracy is a far sighted phenomenon. Now even near to actual democracy rarely exists except Scandinavian states. Democracy index 2018 published by The Economist revealed stats about the democracy across the globe. Even United States of America was numbered at 25th number in top 30 democratic countries. It was also categorized under flawed democracies. Whereas first five were the Scandinavian countries having Norway at the top.

Under the veil of democracy self-interest of an individual or specific flock is being wangled. On plight of humanity individual or groups who holds power imbibe their benefits. Power no longer remains an instrument to direct and regulate society but to tranquilize the populace and suck the benefit out of greater pain.

Corruption perception index of 2018 revealed that more than two-thirds of the countries secured to score below 50 with an average score of 48 out of 100. It also states that countries have failed to curtail corruption and also to take considerable measures to uproot it. One needs to understand that when the leaders become economic poachers it steadily annihilates the society.

What usually happens is such individuals after gaining throne shift tides of economic rivers to their own pots. Instruments like trade policy is often not used to further the national interest but the business interest of a single wealthy individual or a handful. Tenure is considered as a business deal to extract maximum benefit. Often individuals make the deals on the form of government to enrich the few. New denotation of democracy seems to be that when there are many hands to snaffle then it is regarded as “democracy” and when there is one hand or few then it is labeled as monarchy or dictatorship.

Across the globe there is a wave of populism where contestants of throne are getting votes on populist narratives. Sedatives like populism, ethno-nationalism put the contestant into power but put rest asleep. Heaps of national wealth is looted by the ones who are

When the economics are being controlled and manipulated by few hands it often leads to debts and ultimately when there is less circulation of wealth and money the society and economy itself collapses. If the dynamics of world kept going the way they are then after the Great depression of 1929 and the financial crisis of 2007-08 there is next big economic collapse around the corner and world is waiting for it to happen.

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Iraq corruption menaces both average citizens and outside investors

Samantha Maloof

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While Iraqi forces are still undertaking the slow, grueling effort to defeat the last vestiges of the Islamic State (IS), and 1.8 million people remain displaced, an equally important and perhaps even more complex political and humanitarian challenge is looming over Iraq. That challenge? Iraq’s egregious levels of corruption, which have poisoned the fundamental relationship between the Iraqi state and its citizens.

As protesters in Iraq’s southern port city of Basra made clear last year, corruption in their country does not just mean acts of bribery, but an entire parasitic “looting machine” that extracts resources and deliver nothing in return. Nor are everyday Iraqis the only ones at risk from the country’s endemic culture of graft, with some of the country’s largest investors – such as the French telecommunications giant Orange – seeing their investments expropriated and themselves kicked out of a market that nonetheless badly needs their support.

A parasitic relationship

The fundamental lack of credibility and legitimacy of Iraq’s official government institutions is at the center of the country’s myriad difficulties, from the government’s frighteningly incompetent attempts to fight off IS during the group’s initial onslaught in 2014 to the graft that seems to have permeated every link in the national bureaucracy.

Perhaps the best way to show the extent corruption impacts the governance of Iraq is to take a close look at one of the oft-touted “success stories” of post-war construction: the semi-autonomous Kurdistan Region of Iraq (KRI). Iraq’s largely autonomous Kurdish region, often held up as a model for the rest of the country, is ruled as a fiefdom by powerful Barzani family, who recently gained an almost “monarchic” degree of control after two of its members, Masrour Barzani and Nechirvan Barzani, were recently respectively elected Prime Minister and President of the regional government.

When the Economist Intelligence Unit once claimed that corruption in the Kurdistan region is “not perceived” to be as bad as in the rest of Iraq, it pointed out this is a “small accolade given that Iraq is ranked 171/177 in Transparency International’s Corruption Perception Index.” A closer look reveals the only research suggesting the KRI is less corrupt seems to be a UN report that relies on asking civil servants how many bribes they are offered. If the results this study are to be believed, the percentage of civil servants being offered bribes in one of the most corrupt countries on Earth stands at only 4% in the KRI and 5% in Baghdad, percentages that fly in the fact of reality.

Orange shows no one is safe

One doesn’t need to depend on international statistics to see the depth of corruption in Iraqi Kurdistan. Last month, a deeply reported article in French weekly Le Journal du Dimanche explained how telecoms multinational Orange and its partner firm Agility, two of Iraq’s largest foreign investors, stand to lose more than $810 million and see themselves stripped of their shares in the Iraqi mobile operator Korek by the country’s telecommunications commission (CMC). While the regulators claim that Orange and its partner failed to “honor their commitments,” the companies insist they are being expropriated via a corrupt process.

The key detail in their accusation? The fact that Korek’s managing director is Sirwan Barzani, Nechirvan Barzani’s first cousin and a key figure in the aforementioned Barzani family. Sirwan Barzani, according to court filings from the companies, has misappropriated tens of millions of dollars from the firm through shady loans and self-dealing.

Allegations that Sirwan Barzani and his allies had managed to corrupt Iraq’s CMC were seemingly proven by the Financial Times last year, which discovered the chief executive of the regulatory body living in a London house that belonged to Barzani’s business partners. Over the weekend, the World Bank’s International Center for Settlement of Investment Disputes (ICSID) agreed to take up Agility’s claims against the Iraqi government.

Steep price to pay

Why would one of Iraqi Kurdistan’s most powerful figures manipulate regulatory officials to expropriate major investors? To prevent those investors, it seems, from exercising their options for full control over Korek. With other major companies like Germany’s Siemens and the US-based GE pursuing their own contractors to help Iraq rebuild and expand its highly inadequate infrastructure, the Korek expropriation could have a major chilling effect.

The fiasco surrounding the Barzani family’s willingness to expropriate one of the country’s most prominent investors also speaks to the sheer sense of immunity Iraqi leaders feel when it comes to taking the country’s wealth for their themselves. While the leadership of the KRI presents itself as a reliable partner for the West, the region’s economic statistics remain dismal despite years of outside aid.

Despite its oil wealth, the region faces both a recession and high unemployment – over 20% for those aged 18-34 and 69% among women under 24 – as well as rolling blackouts. Factional control over construction projects and government ministries, meanwhile, has left public education in Iraqi Kurdistan facing dire shortages of both schools and teachers. Of the KRI’s approximately 6,800 schools, it is estimated that 25% need to be demolished and fully half are in need of renovation. Paralyzed by political infighting, the regional government has not seen to any of these pressing needs.

While international companies like Orange enjoy access to outside recourse, ordinary Iraqis find they seemingly have no choice but to live with systematic corruption and unaccountability every day. Faced with such a bleak picture, and unless the governments ruling over Iraq fundamentally rethink their handling of the country’s resources, it is only a matter of time before the next great period of instability begins.

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The new African currency

Giancarlo Elia Valori

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On June 11, 2019, during a meeting held in Abuja, the federal capital of Nigeria, the fifteen members of the  Economic Community of West African States (ECOWAS) decided to coin – most likely within 2020 – a new African currency, whose name has already been chosen: “ECO”.

 The fifteen States of ECOWAS –  the association that  deals above all with part of the implementation of the CFA Franc – are the following: Benin, Togo, Burkina Faso, Cap-Vert, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau and Liberia, which founded ECOWAS in 1964. Later, with the further definition of the Lagos Treaty in 1975, also Mali, Niger, Nigeria, Senegal and Sierra Leone joined it.

 It should be noted that while Mauritania withdrew from  ECOWAS in 2000, since 2017 the Alawite Kingdom of Morocco has officially requested to join.

 However the “ECO” project, which has been lasting – at least programmatically -since 2015 and much echoes the “EURO” project, was born within a more restricted association of States than ECOWAS, namely the West African Monetary Zone (WAMZ), which is composed of Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone.

 As can be seen, said States also belong to ECOWAS, but they intend to reach an economic and monetary union very similar to the EU’s, considering that their economies are less different than those of the whole group of countries belonging to ECOWAS.

 It should be recalled that the ECO launch has been  postponed as early as 1983 and is currently expected to take place in 2020, but again only on paper.

 Using an old formula of summer media jargon, France defines it as a “sea snake”, but we must always be very careful about oversimplifications and low esteem for friends and foes.

 Hence, certainly eight ECOWAS countries shall abandon the CFA Franc, while the other seven countries their national currency.

  As the final communiqué of the last meeting held by the fifteen Member States, a “gradual approach” is required for ECO, starting from those countries that show a more evident “level of convergence”.

 As we all know, in the case of the EU and its Euro, the convergence criteria were price stability – which is seen as the only sign of inflation, although we do not know to what extent this idea is correct – and “healthy and sustainable” public finance, which means nothing but, within the EU, means a deficit not exceeding 3% of GDP and public debt not higher than 60% of GDP.

 From this viewpoint, things are not going very well in Africa.

 Africa’s debt has just slightly exceeded 100 billion euros, after Ghana recently taking out a 2.6 billion Euro-denominated loan, in one fell swoop.

 In 2018 alone, African countries reached a total debt of  27.1 billion euros, but in 2017 Egypt, Ghana and Benin had borrowed 7.6 billion euros.

 Nigeria will reach 17.6 billion euros of debt at the end of this year.

 Ten African countries have already issued Eurobonds and  there will soon be 21 of them.

 It is equally true, however, that the African countries’ debt-to-GDP ratio is on average 53%, while in the 1990s and in the first decade of 2000 it had reached 90-100%.

 The obvious reasons underlying the recent increase in the African countries’ Euro-denominated (and dollar-denominated) debt are the following: the consequences of the global financial crisis and the structural decrease in the price of raw materials.

 Moreover, considering the very low interest level in the United States and Europe, many investors have also begun to operate in Africa.

 Currently Egypt is the most indebted country, with a total of 25.5 billion euros.

  It is followed by South Africa (18.9 billion euros), Nigeria (11.2 billion), Ghana (7.8 billion), Ivory Coast (7.2 billion), Angola (5 billion), Kenya (4.8 billion), Morocco (4.5 billion), Senegal (4 billion) and, finally, Zambia with only 3 billion euros.

 The analysts of international banks predict that, in the future, the Euro- and dollar-denominated debt will not be a problem for African countries.

Quite the reverse. According to the World Bank, the debt-to-GDP ratio is expected to fall by up to 43%, on average, in all major African countries.

 The worst standard in terms of share of Eurobonds on total debt is Senegal (15.5%), while Tunisia remains the best standard, with 6.3 billion euros of debt issued through Eurobonds.

 As can be easily imagined, other variables are the cost of debt service, which has doubled in two years up to reaching 10%, and the uncertainty of the barrel price on oil markets, considering that all these countries, except Nigeria, are net oil importers.

 Therefore, it is certainly not possible to talk about “sustainable” finance, even though many ECOWAS countries have a debt-to-GDP ratio that currently make us envious.

 As is well-know, also the exchange rate stability – required for entering the Euro area – is one of the primary “convergence” criteria.

 A 6.3% average annual GDP growth is expected for the 15-member African association, considering the expansion of oil extraction in Ivory Coast, Sierra Leone, Burkina Faso and Ghana, while fiscal stability -which is, on average, about 1.7% higher in 2019 – is acceptable.

 Hence, if we apply the usual Euro criteria, the new ECO currency appears very difficult, but not impossible, to be created – at least in the long run.

 ECOWAS has repeatedly advocated its single currency project: it was initially theorized as early as 1983, then again in 2000 and finally in 2003. As already seen, currently there is much talk about 2020 as the possible date for its entry into force.

 Certainly there is already an agreement between ECOWAS countries for the abolition of travel permits and many of the fifteen Member States are entertaining the idea of  economic and productive integration projects.

 Nevertheless, as far as the budget deficit convergence is concerned, only five countries, namely Cap-Vert, Ivory Coast, Guinea, Senegal and Togo can currently comply with the single African currency project, since they record  a budget deficit not higher than 4% and an inflation rate not exceeding 5%.

 Hence we cannot rule out that there will be convergence in reasonable time, but it is unlikely it will happen by the end of 2020.

 Moreover, the levels of development in the fifteen Member States are very different.

 It is impossible to even out the differences in the levels of debt, interest rates and public debt in the short term, considering that the share of manufacturing in Africa is decreasing and the economies that operate on raw materials have always been particularly inelastic.

 Furthermore, Nigeria alone is worth 67% of the whole ECOWAS  GDP – hence  the ECO would ultimately be an enlarged Naira.

 With the same problems we have in Europe, with a Euro which is actually an enlarged German Mark.

 The inflation rates range from 27% in Liberia to 11% in Nigeria, with Senegal and Ivory Coast recording a 1% “European-style” inflation rate.

 Certainly the CFA Franc is a “colonial” instrument, but it has anyway ensured a monetary stability and a strength in trade that the various currencies of the former French colonies could not have achieved by themselves.

 It should be recalled that the mechanism of the CFA Franc, envisages that the Member States must currently deposit 50% of their external reserves into an account with the French Treasury.

 However, the Euro problem must be avoided, i.e. the fact it cannot avoid asymmetric shocks.

 The Euro is a currency which is above all based on a fixed exchange rate agreement.

 We should also consider the adjustments made by Nigeria in 2016-and, indeed the inflation rates of the various ECOWAS countries are stable, but not homogeneous.

 They range from 11% in Nigeria to 1% in Senegal.

Between 2000 and 2016, Ghana had an inflation rate fluctuating around 16.92%.

 The fact is that all ECOWAS countries, as well as the other African States, are net importers.

 Furthermore the West African countries do not primarily trade among themselves.

 While single currencies are designed and made mainly to stimulate trade, this is certainly not the case.

 The CFA Franc, however, was a way of making the former French colonies geopolitically and financially homogeneous, with a view to uniting them against Nigeria – the outpost of British (and US) interests in sub-Saharan Africa.

 Furthermore, none of the ECOWAS governments wants to transfer financial or political power to Nigeria, nor is the latter interested in transferring decision-making power to  allied countries, which are much smaller and less globally important.

 The region could be better integrated not with a currency -thus avoiding the dangerous rush that characterized the Euro entry into force – but with a series of common infrastructure projects or with the lifting of tariff and non-tariff barriers.

 The largest trading partner of sub-Saharan Africa, namely the EU – with which the ECO would certainly work very well -currently records a level of trade with the ECOWAS region equal to 37.8%.

 Nigeria exports only 2.3% to the other African partners and imports less than 0.5%.

 However, if ECO is put in place, this will be made possible thanks to a possible anchorage to the Chinese yuan.

 This would avoid excessive fluctuations – probable for the new currency – but would create ECOWAS African economies’ greater dependence on the Chinese finance and production systems than already recorded so far.

 Certainly it would be a way of definitively anchoring Africa to the Chinese economy.

 From 2005 to 2018, Chinese investment increased everywhere, but in Africa it totalled 125 billion US dollars.

 Africa is currently the third global target of Chinese investment.

 17% of said Chinese investment has been targeted to Nigeria and its ECOWAS “neighbours”, especially to railways and other infrastructure.

 Moreover, in 1994, thanks to its liquidity injections China rescued the African wages from the CFA Franc devaluation, which had halved all incomes.

 Those who govern Africa will control globalization. India is now the second major investor in Africa, after China. The EU takes upon itself the disasters of African globalization, but not the dividends.

 Whoever makes mistakes has to pay. There has not been a EU policy that has “interpreted” Africa intelligently, but only as a point of arrival for ever less significant “aid”.

 Therefore China will bend the African economic development to its geostrategic aims and designs.

 China offers interest rates on loans that are almost seven times lower than Western markets, which never reason in geopolitical terms, as instead they should do.

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