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Libya

A Fragile Country Tale: Restrictions, Trade Deficits, and Aid Dependence

Massimiliano Calì's picture

 Masaru Goto, World BankPart of the World Bank’s new vision is to step up its efforts to help fragile and conflict-afflicted states break the vicious cycle of poverty. But this is no easy task.
 
The destruction of productive assets and the restrictions on the capacity to produce are among the most severe economic impacts of conflicts and fragility. These effects explain why countries in conflict or emerging out of conflict typically have very large trade deficits. The productive sector is often particularly weak by international standards, so exports are low and domestic consumption has to rely on imports. Indeed, five of the ten countries with the largest trade deficit in the world (Timor-Leste, Liberia, the Palestinian territories, Kosovo and Haiti) are considered fragile by the World Bank and other regional development banks (figure 1).
 

Smuggling Adds to Tunisia's Budget Woes

Gael Raballand's picture

The political situation in Tunisia is still volatile, as protests and riots continue to break out across the country. Source- Arne Hoel, World BankRiots broke out across Tunisia last weekend, as citizens reacted to the government’s latest efforts to trim its budget deficit. Officials are struggling to cut spending and increase revenues, all while responding to the demands of a citizenry increasingly dissatisfied with high unemployment and continued inflation.

The economy grew by close to 3 percent last year, but it has not been enough to create new jobs. Making matters worse, many manufacturers and business owners have been forced to lay off workers in response, they say, to a rise in informal trade and “unfair competition”.

A big issue for the business community, informal trade has been equally as troublesome for the cash-strapped transitional government. According to recent World Bank research, the Tunisian government is losing a significant amount of public revenues-- duties, value-added tax and other taxes-- from informal trade along the Libyan and Algerian borders.