Category: Economy

{Project aimed to make UK ‘partner of choice’ in industry, but campaigners warn of potential for ecological disaster.}

The British government spent thousands of pounds of aid money on a project aimed at “establishing the UK as the partner of choice” in the nascent oil and gas sector of one of the world’s poorest countries.

Malawi is believed to have substantial oil deposits, including under Lake Malawi, a pristine freshwater lake – the third largest in Africa – whose southern shores are a protected Unesco world heritage site. Unesco has warned that any oil activity near the lake risks causing an ecological disaster.

Kate Osamor, the shadow international development secretary, said the project raised “real concerns” about development spending being geared towards boosting British trade, potentially at the expense of sensitive habitats.

Under Theresa May’s government the focus of development assistance has shifted towards boosting British interests, with the international development secretary, Priti Patel, saying in September that aid spending should serve both “the poorest people in the world and the taxpayers who foot the bill”.

A document obtained by Greenpeace through freedom of information laws and shared exclusively with the Guardian show the Foreign Office spent nearly £30,000 of overseas development assistance funding on a project supporting Malawi’s government in developing the country’s oil and gas sector. The document, written before David Cameron left office, shows that boosting British commercial interests was already an important part of the Malawi project.

The money came from the Foreign Office’s prosperity fund, which includes among its policy goals a commitment to “work for a secure transition to a low carbon economy”.

Osamor said: “The issue isn’t the amount of money – £30,000 isn’t a lot in aid terms, although of course it’s a lot to the average person in Malawi. But using money that’s supposedly for sustainable development to encourage oil exploration seems highly questionable.”

Greenpeace’s senior climate advisor Charlie Kronick told the Guardian: “The UK government is using aid money supposed to promote, among other things, clean energy and climate projects to help the fossil fuel industry that’s causing the climate problem in the first place.

“What’s worse, this is happening in a country that’s extremely vulnerable to climate change and where oil exploration is largely concentrated around Lake Malawi, a Unesco world heritage site and one of Africa’s largest and most biodiverse lakes.”

He added: “Instead of using aid money to grease the wheels of the fossil fuel industry, the UK government should help Malawi develop the clean, sustainable energy sources many African countries are racing to exploit.”

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The document lists among the project’s advantages creating a “more competent playing field to allow UK companies to compete fairly in a sector in which we are traditionally strong”, and notes that “UK commercial opportunities should emerge through supply chain development”.

Jack McConnell, the former Scottish first minister who helped develop a wide-ranging partnership between Scotland and Malawi, said: “Malawi faces a huge budget deficit and I am sure the UK government would like to help the country diversify its economy away from dependency on agriculture, and tobacco in particular.

“But they have to be very careful that they are helping Malawi and not helping British companies exploit Malawi.”

Osamor said: “I have real concerns when aid appears to be tied to trade like this. We should be working with emerging democracies but taking care not to destroy their habitation. We’ve seen this fail in Nigeria, where a country got so dependent on oil that the environment is destroyed.”

A spokeswoman for the UK government said: “The UK government’s aid funding for Malawi was not linked to UK business interests, and the UK has a clear commitment to keep aid untied … By fostering sustainable economic growth in Malawi, including exploring opportunities in oil and gas, we will help eradicate poverty, create jobs, increase revenue and reduce dependency on aid. This is firmly in the interests of Malawi and the UK.”

Malawi’s government took its first steps towards establishing an oil industry in 2011, when it issued exploration licences for six oil blocks, two of which overlap with the lake. Two of the blocks, including one overlapping the lake, were awarded to a British company, Surestream, although by May 2015 it had sold 80% of its stake and the operatorship to Hamra Oil Holdings, a company from the United Arab Emirates.

All permits were frozen in late 2014 to allow the attorney general to review the licences. But in February this year, four days before a visit by the Scotland secretary, David Mundell, in which he announced £4.5m of additional aid, the president, Peter Mutharika, ended the ban on oil exploration.

Unesco is alarmed by the prospect of oil activity on Lake Malawi, issuing a statement in which it warned: “An accidental spill would pose a potentially severe risk to the integrity of the entire lake ecosystem including the aquatic zone and shoreline of the property.”

It called on companies holding blocks that overlap with the lake to commit to not exploring for oil or gas in protected areas.

“Lake Malawi is an international treasure, with real potential,” said Lord McConnell. “Malawi has extreme poverty and needs economic development, but that has to be balanced with the importance of protecting the lake environment and its biodiversity.”

A spokesman for Malawi’s high commission in London said: “The government of Malawi cares about Lake Malawi and would not want at any point that Lake Malawi would be polluted in any form. Every care will be taken as technology today makes it possible to drill oil in a body of water without causing catastrophic environmental consequences.”

Drilling would only happen after a “proper environmental impact assessment” had been conducted, he added. “The fear of pollution is understandable but not necessary.”

{The International Monetary Fund (IMF) has approved a three-year $12bn (€11bn) loan for Egypt to help the country out of its deep economic crisis.}

Egypt will receive $2.75bn immediately, with the rest subject to its economic performance and further reforms.

IMF Managing Director Christine Lagarde said the bailout would “address longstanding challenges”.

Egypt’s President Abdul Fattah al-Sisi is facing high unemployment and a budget deficit of 12% of GDP.

The country has struggled to attract foreign investment since the political turmoil in 2011 and the so-called Arab Spring, which saw former president Hosni Mubarak overthrown.

Tourism – traditionally a leading source of income for Egypt – has declined sharply over the past five years.

Last week Egypt floated its currency in a move that reduced its value by almost 50% against the dollar in an attempt to strengthen confidence in the economy.

The government also increased interest rates by three percentage points to 14.75%, and raised the price of basic commodities and fuel.

The moves led to widespread criticism of the president and a drop in his popularity. A big security operation was put in place in Cairo to pre-empt mass demonstrations that had been expected on Friday.

Ms Lagarde said the latest “home-grown economic plan” was intended to tackle the country’s large budget deficit, low growth and high unemployment rate.

She said that further reforms, such as reductions in fuel subsidies and legislation to reduce Egypt’s public sector wage bill, were necessary for the country to move forward.

“Resolute implementation of the policy package is essential to restore investor confidence,” Ms Lagarde said.

In 2013, Egypt’s first democratically elected president, Mohammed Morsi, was ousted by the military, led by Gen Sisi, after only one year in power.

Mr Sisi was later elected president in May 2014.

{Devaluation of pound meets IMF demand in exchange for $13bn loan over three years to overhaul country’s ailing economy.}

Egypt has devalued its currency by 48 percent, meeting an important demand set by the International Monetary Fund in exchange for a $13bn loan over three years to overhaul the country’s economy.

Thursday’s much anticipated decision by the Egyptian Central Bank followed a sharp and sudden decline this week in the value of the dollar in the unofficial market, dropping from an all-time high of 18.25 pounds to around 13 to the US currency.

The devaluation pegs the Egyptian pound at 13 to the dollar, up from nearly nine pounds on the official market.

The IMF’s executive board has yet to ratify the $12bn loan provisionally agreed by Egypt and the IMF in August.

Egypt’s central bank increased interest rates by three percent to rebalance currency markets following weeks of turbulence.

{{Intense pressure}}

A shortage of dollars in the economy had put the currency under intense downward pressure in recent months.

A rapid slide on the black market to 18 earlier this week pushed the importers to cease buying, with the rate strengthening to 13 late on Wednesday, creating a rare opportunity for the central bank to devalue.

The central bank said the new exchange rate was non-binding and would serve as “soft guidance to jumpstart the market”.

It was not clear how much foreign exchange would be offered at Thursday’s exceptional sale.

The central bank also said in a statement that it would abolish the priority list for imports and that banks would be allowed to operate until 9pm local time every day, including weekends, for foreign exchange transactions and transfers only.

he Egyptian economy has suffered from a general slowdown since the revolution of January 2011.

Political uncertainty, macroeconomic instability and global economic turmoil since the 2008 crisis have all contributed to Egypt’s prolonged recession, soaring unemployment and foreign currency shortages.

{{Long-term growth}}

Devaluation was always a goal of the government and was necessary for long-term economic growth as the pound was unnaturally overvalued.

In terms of monetary policy since 2011, the government has attempted to support the Egyptian pound against the dollar, a policy the central bank governor [who was appointed in November 2015] labelled a “grave mistake”.

Already, Egyptians face capital controls, including limits on transferring currency abroad and the amount they can withdraw to travel overseas.

Egypt’s poor will bear the brunt of the devaluation, where already 27 percent of the population lives below the poverty limit.