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Isaias Afwerki’s Cruel Joke on the People

Kiflezgi Berhe 02-15-16

Isayas Afwerki, the dictator in the tiny nation of Eritrea, is well known by many. Once in a while, the international media mention the man to highlight the rights violation in that nation and the regime’s role in destabilizing the region. Indeed, he provides them with ridiculous conspiracy theories, accusations and unseemly remarks.

Many remember him for his bizarre remarks to Al-Jazeera in 2008. When asked “when are elections going to be held in Eritrea. The elections scheduled for 2001 they didn't take place when is that going to happen”, Isayas Afewerki’s response had been:

“We'll see what the elections in the United States bring about and we would wait for about three four decades. Eritrea is going to wait three or four decades before it hold elections maybe more may be more or not. But is of course depends on what you call elections what you believe in elections what you think in terms of elections.”

He added, “I can tell you it may never happen it may take decades. It depends on what you mean by democracy. If you really understand what democracy means and if you're talking about general elections that's another issue. If you're telling me that the democracy and elections where witness the last five or 10 years promoted by the united states in a number of countries to serve its own interest, I can't tell you these are not elections for us, this is not democracy for us. If you mean democracy, a polarizing force I think that the is not democracy for us  and this day since become very fashionable for people to talk about  democracy, when society is divided along ethnic early yes lies and we are not party to that kind of democracy.”

Others might remember him for his 2010 outburst when a journalist who asked “let's talk about the drought in the Horn of Africa. Eritrea like all the other countries is suffering from this and yet you are reluctant to let aid workers into your country what is the justification for that?”

“When we have enough for why do we need someone to feed us? Why the people want to spoon feed us, when we have enough food?

How can you possibly imagine and say I am hungry when I'm not hungry? Why do you want to believe that? Why do you want to believe people are hungry and people out in need of your support? Why do you want to believe that that the really my state of mind for people when they can comment”

We can go on and on quoting similar bizarre remarks. The dictator in Asmara has spent hundreds if not thousands of hours making such bizarre remarks about everything.

Indeed, these are indicators of impunity and his disregard to common norms and suggestions from advisors’. Nonetheless, politicians prone to gaffe and poor articulation are not unique to Eritrea. It could occur in other places, though at a lower rank and frequency.

While these remarks are to the amusement and entertainment of foreigners, the people of Eritrea are more distraught by his practical and cruel jokes. They are disillusioned by his statements and decisions daily actions, which are locally circulated and barely get the attention of international media.

The latest example of such is the currency redemption chaos Isayas launched on the nation for vague reasons. The Asmara regime announced that all Eritrean currency, Nakfa, notes in circulation must be exchanged for new government-issued notes.

The rationale for the decision was provided by President Isayas Afewerki during his marathon interview last month with the government-owned Eri-TV and the party owned Radio Dimsti Hafash. Isayas began his explanation by saying that:

“The underlying objective of the measure is to spur and bring about overall economic restructuring…..It is an essential and indispensable tool for rectifying several distortions in the economy. As such, the introduction of new currency notes will serve as a catalyst or initial set of measures for bringing about the desired economic adjustments. The process is being implemented now after long preparations.

Full restructuring will require and be predicated on comprehensive assessments of prevailing economic distortions that include: irregularities in the exchange rate of the Nakfa, inflation, fiscal imbalances, and other undesirable trends that aggravate the living conditions of the citizens. These are problems that have accumulated over time.”

Indeed, several problems accumulated through time. That much Isayas is correct. The indicators are abundant.

According to Transparency International, Eritrea is one of the ten most corrupt countries in the world. Especially, in the last five years, the situation deteriorated as its rank in the corruption index worsened. The index is measured by the perception of corruption the public sector. The feeble legal, economic, and political framework of Eritrea allowed government and party officials to siphon billions.

The domestic market shows similar symptoms. As Awate.com reported, Eritrea’s inflation rate has varied between the extremely high recorded in 2009 (34.70%) to the high recorded for 2014 (11.6 %.) In fact, only four African countries - Central African Republic, Ghana, Malawi and South Sudan - have markedly higher inflation rates than Eritrea. This, no doubt, is tied to shortage of goods and inflated money supply.

In Eritrea, the money supply, that is, the “currency outside banks, demand deposits other than those of the central government and the time, savings, and foreign currency deposits of resident sectors other than the central government” is at 115.6% of Eritrea’s GDP.

That means the Eritrean market is flooded with 62 billion Nakfa. It is fair to assume the Asmara regime had been printing money at whim for the past decade. After all, Eritrea didn’t have a budget proclamation for about 13 years.

However, Isayas chose to blame unnamed subversive forces for the regime’s economic blunders. Isayas said:

The first cause can be attributed to external subversion that has been going on for the past 18 years. These include obstacles to our saving and development programs, rendering monetary policies ineffective, instigating unwarranted depreciation of the Nakfa, establishing Banks for illicit transactions, weakening local financial institutions, encouraging illegal and cross border trading and the like. These subterfuges fall within the general scheme of external subversion and constitute the first factor that has impacted negatively – with variably intensity –on our economic growth.

This is a misrepresentation of the fiscal and monetary mess, coupled with the impunity of government and party officials, which forced people to keep their money at home. Moreover, in recent years, everything has went to the informal economy. Hawala services, loan services, saving functions, etc. have proliferated in the underground sector. Therefore, there are billions of Nakfa in these informal business.

Economists and experts of public policy agree that the proliferation of an informal economy is the failings of the government. Therefore, the regime should make the necessary structural adjustments to improve the situation. Nonetheless, the regime is bent on blaming the people and punishing them for it.

In actuality, the regime itself takes the lion share in the proliferation of these clandestine and detrimental economic practices. As the United Nations Monitoring Group exposed in its report:

“The lack of transparency of the country’s financial management continues to enable the Government of Eritrea to maintain a PFDJ-controlled informal economy, which involves hard currency transactions managed through a complicated and obscure network of companies and business entities incorporated in a number of national jurisdictions.

“Senior officials within the Government of Eritrea and PFDJ continue to collect millions of dollars per year through unofficial revenues by means of private business arrangements involving PFDJ-run companies domestically and abroad. Although it is difficult to obtain accurate data on the size of the country’s informal economy, the Monitoring Group estimates that the incoming revenue stream is substantial.

“The Monitoring Group has obtained information through direct sources that Government officials have created and maintain a global financial structure that is not registered in the name of PFDJ. This architecture includes tax havens, secret trusts and companies incorporated under the names of officials and, in most cases, under the names of private individuals. The financial structures are highly complex and have been established across several countries with the help of local facilitators or “friends of the regime” that aid their clients to set up fiscal mechanisms designed to be inaccessible. The Monitoring Group has documented extensively the process by which senior officials of the Government of Eritrea have established a clandestine financial apparatus to both generate and administer revenue.”

Similarly, the foreign currency system is a sham. The annual review by the United States government illuminates that: “State-owned institutions are the only bodies authorized to maintain an account for foreign currency reserves and manage foreign exchange activities. There are three state-owned banks in Eritrea: the Bank of Eritrea, the Commercial Bank, and the Commercial and Housing Bank. Himbol Financial Services, the arrangement by which foreign currency is sent from abroad both in payment of the two per cent tax and also as private support from the Diaspora to Eritrea-based family members, is run by the sole political party, the People’s Front for Democracy and Justice (PFDJ).”

According to the State Department’s report: “Eritrean Embassy personnel and consular agents abroad collect the two per cent tax, channeling it to the Himbol system in Eritrea. That the Himbol system processes both public (two per cent tax) and private (gifts from relatives abroad) transactions has meant that some incoming foreign currency exists in a legal no man’s land, without adequate accountability or transparency. In 2015, in response to the UN’s Somalia Eritrea Monitoring Group (SEMG) report, the Eritrean government disclosed its revenue in relation to the 2 percent income tax imposed on Eritreans living abroad, claiming that the, “aggregate RRT collected in the past four years did not exceed 73 million US dollars.” No documentation was released, however, to substantiate this figure.”

“Monetary stability is fragile, reflecting excessive money creation to fund chronic fiscal national deficits. Several times during 2014, only smaller denominations of bills, such as ten or twenty nakfa notes were available, with no explanation. Eritrean banks impose a limit on cash withdrawals of ERN 10,000. How many transactions are allowed in a given timeframe remains unclear. For example, one branch of a bank may limit the number of transactions to once a week while a different branch of the same bank may allow daily transactions. In special circumstances a larger withdrawal may be allowed.”

If Isayas had the interest and courage to tackle the problem, he would have started by dismantling this covert empire of the PFDJ. However, he is oblivious to such prudent governance. Isayas would rather punish the people with a massive currency redemption exercise that would add nothing more than an opportunity to harass and expropriate, hardworking citizens.

Now, the people face the difficult choice of either seeing their hard-earned money become worthless or go to the banks and try to explain where and how they earned the money, which is likely ends up in imprisonment or fine besides to expropriation. Either way, the regime expropriates a vast amount of money and reduce the money supply it created by recurrent currency printing.

And the people have nowhere to go. What makes things worse is that they have no alternative recourse to justice. Indeed, as the United Nations Human Rights Inquiry Commission on Eritrea demonstrated, the justice system under the regime is a sham.

The Commission documented several evidences on how farcical the Eritrean justice system is. Let’s cite a couple of them for the sake of illustration.

A former head of a sub-zonal office of the National Security Office in Asmara told the Commission:

“We could do anything we wanted to do. I could take a person and put him in prison for 10 days without any reason. I did not need to go to a judge at all.”

A fisher, who was shot in the leg during the conflict between Eritrea and Yemen over the Hanish Islands in 1996, recounted:

“My case was heard by a military court. There was no evidence brought against me to prove the charges of smuggling contraband goods and people from Yemen to Eritrea.

I argued that I should be paid compensation for the damage I suffered. Despite having no evidence, the judge told me that I did not get more than I deserved, and I should be imprisoned for six months. I was given a suspended sentence of six months.”

A former head of a sub-zonal office of the National Security Office in Asmara told the Commission:

“We could do anything we wanted to do. I could take a person and put him in prison for 10 days without any reason. I did not need to go to a judge at all.”

The son of a person who died in detention after being arrested for attempting to flee the country reported to the Commission that he petitioned the High Court in Asmara to shed light on the circumstances of his father’s death. In the words of the witness, though:

“The judges tried to gather information but after three or four days they gave me an answer: ‘We cannot do this because the case connects with the Government. The file is closed,’ they said. Such a story is a normal scenario in our country.”

Similarly, a victim reported: “I was taken to various prisons. Each time, the officer who received me had a file on me. From the file, he could decide the punishment. He is the judge and he decides my fate. Sometimes they would receive a phone call and they would punish me based on what they were told. They did not tell me what I had done.”

This is the reality in current day Eritrea. Indeed, it is this lack of rule of law that undermines the economy and encourages the informal transactions that resulted in the Nakfa crisis.

The solutions for the economy are not mysterious as Isayas tries to make it in his long-winded interview. It simply requires a removal of the risks that scares away investors including lack of transparency in the regulatory process, limits on possession and exchange of foreign currency, lack of thoroughgoing dispute settlement mechanisms, difficulty in obtaining licenses, potential expropriation of private assets, and infrastructure challenges such as high fuel prices and unreliable provision of electricity and water.

Indeed, regardless the issuance of new currency, the lack of consistent, commitment to structural reform will continue to hamper Eritrea’s economic prospects. The regime has long been resistant to measures that would truly reform the economy from restrictive command economy that would spur broad-based growth and market development.

It has also refused to implement recommendations to loosen business practices, issue construction permits, correct macroeconomic imbalances or address foreign currency exchange anomalies.

In the absence of transparent annual public budget allocation, extreme limits on possession and exchange of foreign currency and lack of transparency in conversion and transfer policies, the Nakfa crisis is unlikely to be stamped out.

But that is how the regime in Asmara does business. Instead of implementing relevant reforms and reprimand its corrupt officials, it would rather create a massive currency redemption exercise.

A phony currency redemption exercise with dubious relevance and prospect for success is Isaias’s latest cruel joke on its people.

 


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