The faltering response to the COVID 19 crisis in the Arab region

The COVID-19 health crisis added to the multidimensional crises in the Arab region and their manifestation in conflicts, wars, economic and social inequalities, and the increasing number of refugees and migrants. It could lead to severe repercussions at the economic, social, and political levels. According to an ESCWA preliminary estimate, the region will lose at least USD42 billion in 2020 due to the Corona pandemic. ESCWA also considered that the global spread of the virus and the growing impact of low oil prices could aggravate income losses. Unemployment is expected to increase by 1.2 percentage points, meaning the loss of around 1.7 million jobs. The Arab region registers some of the highest rates of inequality around the world, and informal employment accounts for 50% of jobs. It also lacks universal social protection systems and is thus unable to protect workers and ensure their dignity during work stoppages.

The region also hosts unprecedented numbers of refugees and  migrants  living in grim conditions who will face additional repercussions as the quarantine continues. For women, who already face social, political, and economic exclusion in the region, the crisis meant additional social marginalization. Cases of domestic violence rose dramatically during the quarantine, amid additional complications related to difficulties faced by women in access to assistance, whether from friends and family, from helplines, or the application of the law. This situation explains the fear of the magnitude of the expected social impact of the current crisis.

Furthermore, most countries in the Arab region suffer from a financial deficit, brought about by their adopted economic policies, weak production capacities, and high borrowing rates. It is especially true in countries such as Lebanon, Jordan, and Tunisia, which top the list of Arab countries in terms of the heavy per capita share of the debt. Debt service has become a burden on State budgets, reducing its ability to respond to social emergencies. On the political level, the impact of the crisis began to materialize at the start of the health closures. The pandemic temporarily emptied the streets of protesters in Algeria, Lebanon, and Iraq. The region›s armies regained public squares in the name of the quarantine. There are fears that the regimes might exploit the epidemic to increase their control and thus limit and suppress freedoms. This trend is apparent in the attempts to impede civil society from participation in response operations and related public policymaking in particular.

Government Responses in the Region

Country

Financial and Social Measures

Jordan

1. Postponing sales tax collection local and imported health goods.
2. Allocating 50% of maternity insurance revenues to material assistance for the elderly and sick.
3. Applying price ceilings for essential products.
4. Postponing 70% ofthevalueofcustomsdutiesforselectedcompanies andreducingtheprivatesector’ssocialsecuritycontributions.

Lebanon

1. The government established a national solidarity fund for in-kind and cash donations.
2. The Ministry of Interior announced the extension of all deadlines related to taxes and duties.
3. The Ministry of Social Affairs adopted a plan in collaboration with Municipalities, Social Affairs Centers, and the military to distribute solidarity baskets containing food and disinfectants for families affected economically or financially by COVID-19. Cash assistance is also in process.

Iraq

1. The Central Bank of Iraq established a fund for donations from financial institutions,  with  initial contributions  of  USD20  million.
2. The Central Bank announced the suspension of interests and payments for small and medium enterprises through the targeted lending initiative (“One Trillion Iraqi Dinars” initiative). It encouraged banks to extend maturities on all loans.

Palestine

1. The Palestinian Monetary Authority postponed the payment of monthly/periodic loans for all borrowers for the next four months and the tourism and hotel sectors for the next six months. It also prohibited the collection of fees, commissions, or additional interest on deferred payments.

Egypt

1. The government announced a USD6.4 billion (100 billion Egyptian pounds, 2% of GDP) stimulus package to mitigate the economic impact of COVID-19.
2. It increased pensions by 14%.
3. It reduced energy costs for the entire industrial sector, provided real estate tax exemptions to the industrial and tourism sectors, and intensified subsidies for exporters.
4. As part of the EGP100 billion, the goverenment earmarked 50 billion for the tourism sector that contributed approximately 12% of Egypt’s GDP, 10% of employment, and about 4% of revenue, as of 2019.
5. It extended the moratorium on the agricultural land tax law for two years.
6. It reduced stamp duties on transactions and taxes on dividends and postponed the capital gains tax until further notice.

Morocco

1. The authorities created a special fund for managing the epidemic, with a value of about USD1 billion, funded by the government and voluntary contributions from public and private entities. This fund will cover the costs of upgrading medical facilities and supporting companies and families affected by the epidemic.
2. Those registered with the pension fund who become unemployed will receive 2,000 dirhams per month and can postpone debt payments until June 30. Besides, all companies can postpone social contribution payments until June 30; companies with an annual turnover of fewer than 20 million dirhams can defer tax payments.

Algeria

1. In response to the oil price shock, the authorities announced their intention to cut current spending by 30% while keeping wages intact and protecting spending on health and education. The government is also preparing a supplementary financial law, which will include measures to mitigate the economic impact of the virus. In particular, the law will include measures to compensate for losses incurred by companies.
2. Individual and corporate tax returns and payments were postponed, except for large companies.

Mauritania

1. The government reduced the interest rate from 6.5% to 5%, the marginal lending rate from 9% to 6.5%, and reserves requirements from 7% to 5%.

Tunisia

1. Tunisia announced a TND2.5 billion contingency plan. The package includes postponing payments for communications and information technology tax and other taxes and social contributions, value-added tax exemptions, value-added tax refund procedures, speeding up payment, rescheduling taxes, and customs arrears. It aims to provide liquidity for the private sector, to reduce layoffs, and to protect the most vulnerable, especially in the informal sector.
2. The plan also includes expanding budget allocations for health expenditures, in addition to setting up a fund of TND100 million to purchase equipment for public hospitals. In social terms, this also includes cash transfers for low-income families, the disabled, and the homeless.

Yemen

No Procedures

Source: Information gathered from the IMF›s monitor of crisis response policies in MENA countries.

The above table, in addition to consultations through ANND’s framework, indicates that the level of economic and social response to the crisis has remained below par. Despite the compelling impact of the crisis on the economic and social situations, government responses were lacking. They allocated aid through targeting, which did not follow any comprehensive approach. The response focused on countries that initiated measures to refocus regulations and public policies as is and to adopt economic approaches without placing people at their center.

As the crisis proves once again, neoliberal approaches are incapable of protecting citizens and their resilience in dealing with such shocks. Austerity trends followed around the world are some of the main reasons that led to the inability to face the Corona crisis. They have led to the exhaustion of health systems even in developed countries, who became unable to respond to crises and epidemics. Notwithstanding, Arab countries did not take the initiative to rethink the adopted general policy approaches. Their responses stuck to the same general directions and fragmented approaches that seek to support businesses through tax exemptions, deferral of debt obligations, and support for small and medium-sized companies. All the while, aid to marginalized groups remains inadequate, and there is no evidence of any steps to rethink the current social protection systems. On this basis, responding to the crisis requires comprehensive approaches addressing the immediate dimension through rapid interventions to limit the collapse and seek to protect productive and decent-work-generating economic sectors. Such approaches should be part of a long-term strategy based on lessons learned from the crisis and in the proposals for an alternative development paradigm with universal human rights at its core. Addressing a crisis of global proportions requires cooperation and synergy between countries. However, quarantine measures that imposed border closures were accompanied by countries closing upon themselves and focusing on national crisis response initiatives. They failed to take into consideration its long-term global repercussions, which will bounce back to all countries. This isolationist approach is repeated in the Arab region amidst the faltering framework of its regional institutions and political divisions, which were unable to push towards regional cooperation to face the crisis. Low oil prices and their disastrous impact on Gulf Cooperation Council (GCC) countries came to reduce the possibilities and opportunities for cooperation, although Arab cooperation is needed now more than ever.

By Zahra Bazzi, Arab NGO Network for Development (ANND).

Source: News Bulletin "The pandemic's tremendous effect on the Arab region". Arab NGO Network for Development (ANND).

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