Mideast's old recipe for social peace backfires

AP News
Posted: Oct 01, 2013 3:13 PM
Mideast's old recipe for social peace backfires

KHARTOUM, Sudan (AP) — Sudan's deadly street riots, provoked by a near-doubling of fuel prices, highlight a problem that has become critical across the Middle East — the subsidies that for decades have kept down the cost of basic needs for societies where poverty is rife.

They pose a growing challenge to governments in the region, particularly in the aftermath of the Arab Spring uprisings. Fuel and food subsidies have become increasingly unaffordable, taking huge bites out of national budgets, and international lenders want to see such spending scaled back, but governments fear violent backlash.

The elimination of Sudan's fuel subsidies last week hiked the price of such basics as bread, cooking gas and bus fares. The result was the worst unrest in the capital Khartoum in two decades, with a harsh government response and dozens reported killed.

Many Sudanese worry that their livelihood won't survive without subsidies.

A widowed mother of seven who sells tea and home-made custard on the streets of Khartoum said she has switched from cooking with gas to coal, but that overall "life has become unbearable."

Another vendor who had laid out colorful rings and necklaces on a sidewalk said his main challenge now was paying for transport, school fees and sandwiches for his three children. "There was nothing like this before," the tall, slim man said of Sudan's economic crisis, glancing nervously at a bank guard nearby.

Both vendors spoke on condition of anonymity for fear of getting caught up in the government's crackdown.

Critics say the government has mismanaged the economy, using up resources during an oil boom while investing little in education, hospitals or agriculture. Sudan took a further hit with the secession of oil-rich South Sudan in 2011 while fighting rebels on three fronts. Faced with empty coffers and spiraling inflation, the government was finally forced to hit subsidies.

A gallon (3.8 liters) of diesel went from eight Sudanese pounds ($1.81) to 14 pounds ($3.18); a gallon of gasoline from 12 pounds ($2.70) to 21 pounds ($4.70); and a canister of cooking gas from 14 pounds ($3.20) is now 25 pounds ($5.60).

The case of Sudan, a vast country with one of the world's poorest populations, is perhaps extreme. But the problem is widespread.

In 2011, half the world's pre-tax energy subsidies, or $240 billion, were spent in the region's 19 countries, according to the International Monetary Fund. Subsidies gobble up one-third of Egypt's $84.5 billion budget, according to domestic figures, and the IMF says the Arab world's most populous country spends three times as much on energy subsidies as on education.

"Across the Arab world, there is increased addiction to these subsidies," said Farah Halime, editor of the regional blog Rebel Economy. "It's very difficult to tell a nation that we are going to take these away, even if it means that it will benefit the people who really need it."

Big subsidies were long a part of the Arab world's social contract, buying social peace in the absence of political freedom and economic opportunity.

But job creation lagged far behind population growth and helped drive the protests that erupted in 2011, toppling rulers in Tunisia, Egypt, Libya and Yemen, igniting civil war in Syria and rattling governments in Jordan and the Gulf.

Many hopes have since been dashed, particularly those for jobs and economic reform.

In Egypt, neither President Mohammed Morsi of the Muslim Brotherhood, elected in 2012, nor the military that toppled him a year later, has tackled the subsidies, seen as a major obstacle to economic recovery.

Critics say blanket subsidies benefit the wealthy more than the poor, divert public funds from health, education and welfare and encourage overconsumption and corruption. Subsidized food is often traded on the black market or wasted.

Reformers say subsidy cuts should be coupled with targeted support for the poor and warn that without such a buffer, poverty could increase sharply.

For example, Egypt's official poverty rate of 25 percent of the country's 85 million people could rise to 34 percent without food subsidies, according to a study by the World Food Program and the International Food Policy Research Institute. And some nongovernmental estimates put the number of poor already at 40 percent or more.

Aida Mohamed, a 52-year-old widow who earns $115 a month as a postal worker, said she depends on subsidized rice, cooking oil and sugar to make ends meet, because she already spends $20 on rent and $72 on market-price food.

The economies of the region's richer oil-exporting countries in the Gulf are also distorted by subsidies, though they face less urgency than the poorer oil-importing countries to cut spending.

Jordan, Morocco and other oil importers have begun trimming subsidies.

Last year, defying unusually violent protests and even calls to oust the king, Jordan eliminated virtually all fuel and gas subsidies, switching to cash payments to the neediest. Flour, animal feed, water and electricity are still being subsidized, but the government is considering cuts there as well.

Under Jordan's new system, high school teacher Khalifeh Awadallah, 40, gets an annual cash rebate of $382 to make up for increased bus fares and the higher price of cooking gas.

Most of the family's $1,000 monthly income goes on school fees and the mortgage.

In Sudan, a country of 38 million people, the government had been promising since January to increase minimum wage and public sector salaries. After last week's riots it announced one-time aid payments of $21 each to 500,000 families and said it would make good on the promised salary hikes.

The cuts, said Abdel-Rahman al-Khidri, the governor of the Khartoum district, were "bitter medicine needed for treatment and recovery."


Laub reported from the West Bank. Associated Press writers Tony Gabriel and Sarah El Deeb in Cairo and Mohammed Daraghmeh in Ramallah, West Bank contributed to this report.