Tag: managing compensation

Haiti Gang Violence

Haiti at a Standstill: What to Know About the Escalating Gang Violence in the Capital

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors the world’s most dynamic labor markets, keeping you informed about critical trends and developments gaining significant media attention.  

Port-au-Prince is in a state of paralysis as Haiti gang violence spirals out of control. This eruption of chaos has led to the resignation of Prime Minister Ariel Henry in the face of mounting pressure.  

With a power vacuum now in place, the gangs are expanding their influence in Port-au-Prince and fighting for control of the city. Yet, the future of Haiti’s government appears increasingly uncertain. As a result, Haitians are grappling with the immediate dangers and the long-term question of who will guide the Caribbean nation out of the crisis. 

What is happening in Haiti? 

On the week of 29 February 2024, armed gangs in Port-au-Prince attacked two of Haiti’s largest prisons and other key infrastructure. More than 3,800 inmates have fled, and the gangs have openly tried to assert political control in the country. This recent escalation of Haiti gang violence unfolded after Henry left the country on a trip to Kenya to seek support in combating Haiti’s long-standing gang problem.  

Gang leaders took advantage of Henry’s travel to seize control of the capital. The gangs attacked police stations and the international airport, preventing the Prime Minister from returning. Its most visible leader, Jimmy Chérizier, has called on Haiti’s many criminal groups to join forces and overthrow Henry’s government. 

After two weeks of continuous violence back home, Henry announced in Puerto Rico on 12 March 2024 that he would resign as soon as a transitional presidential council was formed. However, Henry remains unable to return to Haiti, and creating the council requires careful consideration and planning. 

According to United Nations (UN) officials, about 80% of Port-au-Prince and the surrounding region is now under gang control. Furthermore, UN reports estimate that 5.5 million people—nearly half of Haiti’s population—need humanitarian aid.  

How is the crisis affecting humanitarian groups? 

What is clear is that Haiti’s new surge of unrest is causing a dramatic increase in the country’s humanitarian needs, displacing tens of thousands. 

The escalating Haiti gang violence in Port-au-Prince has created a nightmarish situation for humanitarian groups trying to deliver aid. Restricted movement and fierce clashes have severely disrupted the flow of essential supplies, including food, water, and medicine. 

Caught in the crossfire. Beyond the logistical challenges, aid groups face the constant threat of violence. Staff members are forced to navigate volatile areas controlled by gangs, putting their safety at risk. 

The path forward. The immediate focus is restoring security and facilitating the safe passage of aid workers so they can respond swiftly to the deepening crisis. Analysts and observers agree that collaboration between Haitian authorities, international organizations, and local nonprofits is vital to setting up secure aid corridors. 

The long road to recovery. The long-term consequences of this crisis on development and humanitarian efforts are a growing concern. Disruptions to aid delivery will worsen existing issues like poverty and malnutrition. 

How are the Haitian government and the international community responding to the crisis? 

In response to the increased violence, the Haitian government declared a state of emergency on 3 March 2024. Nighttime curfews are also being enforced in some areas to “take appropriate measures in order to regain control of the situation.” Additionally, the government has deployed more police forces. However, these efforts have been largely ineffective against heavily armed gangs. 

The international community has expressed deep concern over the rapidly deteriorating situation in Haiti. UN Secretary-General Antonio Guterres emphasized the urgency of addressing the crisis. Specifically, he called for increased financial support for the UN-authorized multinational security mission, which is critical to restoring stability in the nation. 

How Birches Group can help 

The current turmoil in Haiti highlights the importance of having a Special Measures Policy. This type of policy allows your organization to adapt its human resources strategies even when faced with unforeseen events. A well-crafted Special Measures Policy includes triggers and immediate responses to cushion the effects of crises on staff while assessing market movement in succeeding months.  

Don’t wait for a crisis to happen—take a proactive approach. Birches Group can help you develop a Special Measures Policy today. Our expert guidance will address your needs, ensuring your organization continues functioning amid social unrest. By taking this critical step, your organization stays resilient in an ever-changing world. Contact Birches Group today. 

While this headline article was written in mid-March 2024, Haiti’s social unrest and political crisis are rapidly evolving. The information presented, including statistics and events, reflects the understanding at the time of writing. 

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Businesses Live with Dollarization in Lebanon

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group reports on what is happening in labor markets that are making headlines around the world, bringing you up to date on the news

Experiencing a financial and economic collapse that the World Bank ranks among the world’s worst since the 1850s has led to dollarization in Lebanon.

The country’s currency, the Lebanese Pound (LBP), has lost over 90% of its value since the crisis erupted in 2019. International Crisis Group reports that the plummeting LBP has caused havoc across the Lebanese economy. Salaries have melted in value. Hyperinflation has reached triple digits, immensely reducing purchasing power. According to the United Nations (UN), over 80% of the population lives in sudden, multidimensional poverty.

A highly volatile and dollarized market

Birches Group first observed signs of volatility in Lebanon in November 2022, when the country was listed in the Market Monitor report at Level 4 (of six). In mid-December, Lebanon’s level of volatility escalated to Level 5, indicating a wide prevailing practice to denominate salaries in United States Dollars (USD). (It should be noted that the significant exchange rate movement we have been seeing in Lebanon is most likely caused by the UN switching its source of exchange rates to one that better reflects local conditions.)

The LBP’s plunge has led to a de facto dollarization of the economy, says Arabian Gulf Business Insight. Some observers and economists believe dollarization would be a solution to the crisis and a way to secure monetary stability.

Dollarization explained

Dollarization is the process of replacing the domestic currency with a foreign one to serve the essential roles of money in the economy. This occurs when a country’s currency loses its usefulness as a medium of exchange due to hyperinflation or instability.

Businesses begin to dollarize

The decline in the LBP’s value has led to businesses pricing their items in USD, where customers pay the local currency based on the daily parallel market rate. In March 2023, shops and supermarkets began to price their products in USD. Other businesses have started charging for their goods and services—including rent, household items, clothing, gas, health insurance, and medical care in USD. Outside the public sector, employees are fully or partially paid in USD.

Why are organizations in Lebanon dollarizing?

Trust and confidence in the LBP have waned over the past three years due to many factors and recent events.

Currency devaluation. Since 1997, Banque Du Liban (Lebanon’s central bank) has set the exchange rate at 1,507.50 LBP to 1 USD. The rate remained unchanged for 25 years.

In February 2022, Banque De Liban revalued the official exchange rate to 15,000 LBP to 1 USD—a 90% devaluation from the longtime peg. Officials say the measure is a step towards stabilizing the LBP and eliminating the many exchange rates that have emerged in recent years. But the official exchange rate is well below the rate on the street, says Al-Monitor. According to parallel market rates on LiraRate.org, the LBP trades at 79,000 to 1 USD as of 6 March 2023.

ECA International foresees more devaluations of the official rate in months to come.

Presidential vacuum. Political paralysis has made matters worse for Lebanon. Since the end of October 2022, the country has been without a president. Its deeply divided Parliament has yet to elect a new head of state. This deadlock is unsustainable and paralyzes the government at all levels, says the International Support Group for Lebanon (ISG).

With only a caretaker government and limited authority, an economic plan with reforms required by the International Monetary Fund (IMF) has yet to be devised. The ISG has urged leaders to immediately harmonize exchange and adopt the laws needed to restore investor confidence. Unifying exchange rates, including the parallel market rate used for most goods and services, is a precondition the IMF has set to secure a US$3-billion aid package.

Central bank governor under investigation. European investigators are currently probing the alleged state fraud and actions of Banque Du Liban governor Riad Salameh, who has held the post for three decades. Salameh is suspected of financial misconduct, including money laundering and embezzlement. In March 2023, Lebanese prosecutors charged Salameh, his brother, and an associate with forgery, illicit enrichment, and tax law violations.

How Birches Group can guide your organization

It’s not wrong to dollarize, but denominating salaries in US dollars requires careful thought. Remember that returning to the local currency is difficult once you’ve dollarized. Carefully consider how this process will affect your pay practices and staff.

Is your organization in Lebanon considering paying staff in US dollars? Get guidance on making such a big switch. Contact us today to learn how we can help you develop a Special Measures Policy that includes dollarization.

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Egypt Inflation

Egypt’s Surging Inflation: What is Happening and How Employers Can Prepare

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group reports on the current state of labor markets that are making headlines around the world, bringing you up to date on the news.

Egypt, Africa’s third-largest economy, has been battling inflation for almost a year. Supply chain issues and tight financial conditions have also made Egypt vulnerable to external shocks.

Egypt’s inflation rose to 26.5% in January 2023, up from 21.9% in the previous month and 8% in January 2022. Steve Hanke, an economist at Johns Hopkins University, estimates the actual inflation rate to be 101%.

A currency crunch

The crisis began in February 2022 with Russia’s invasion of Ukraine. The conflict has severely affected Egypt’s economy. The country saw food and energy prices soar. Its tourism industry, which relies on Russian and Ukrainian visitors, further declined. Foreign investors also pulled out over US$20 billion in investments. The Egyptian government responded to the flight of capital by restricting imports. Inflation, which was at 8% the month before, entered the double digits zone at 10%.

With dwindling foreign currency reserves and teetering on the brink of an economic collapse, Egyptian authorities turned to the International Monetary Fund (IMF) for aid in March 2022.

A new IMF loan

After several months of meetings and negotiations, Egypt and the IMF reached a staff-level agreement in October 2022. (The loan agreement was approved by the IMF’s Executive Board in December 2022 but only publicly published in January 2023.) The IMF would provide a support package totaling US$ 3 billion in exchange for implementing several economic reforms, including:

  • Liberalizing the exchange rate,
  • Raising interest rates by 2%, and
  • Scaling back the economic role of the state and military.

The support package would be gradually given to Egypt within four years, subject to periodic reviews. The IMF loan is also expected to catalyze another $14 billion in funding from international and regional partners.

The shift to a flexible exchange rate

One of the IMF’s conditions for its latest loan was to liberalize the exchange rate. With a permanent shift to a flexible exchange rate, the Egyptian pound’s value would be determined by forces of supply and demand rather than set by the central bank.

To comply with the IMF’s terms, the Central Bank of Egypt (CBE) announced in October 2022 the shift to a flexible exchange rate. The CBE has since been devaluing the Egyptian pound in phases. Since the end of January 2023, it has been trading at above EGP 30. The Egyptian pound lost over half of its value in less than a year.

As a result, the depreciating pound has been fueling inflation and adding to the woes of Egypt’s 106-million population.

An economic crisis

Egypt’s fiscal measures have strained its citizens, especially the poor and middle class.

Egyptians are feeling the pinch. Many imported products are unavailable, and food staples have doubled in price. Tens of millions of people cannot afford basic staples, limiting their spending. Families have been cutting back on meat, medicine, and clothing.

Citizens are complaining about their income shrinking. More middle-class Egyptians have turned to charities for support.

In an opinion piece for Middle East Eye, former investment minister Yehia Hamed cites that nearly 70% of Egyptians believe the government is “doing too little to meet people’s need for an acceptable standard of living.”

How is the government responding

According to the World Bank, the government announced various measures to help alleviate the impact of higher prices on the vulnerable. These measures include revising the minimum wage, delaying adjustments to electricity prices, and extending existing food subsidies and cash transfers. The government has also opened outlets where food is sold at lower prices.

But conditions are still problematic. Poverty is elevated in Egypt: roughly 1 in 3 Egyptians live below the poverty line, according to official figures as of 2020.

What analysts say

The immediate outlook for the Egyptian pound is more challenging, says S&P Global. Experts predict that, over the next 3 to 12 months, the Egyptian pound will trade at 32 to 35 pounds against the dollar.

Analysts also predict that inflation will continue to rise in the short term. The World Bank (WB) forecasts Egypt’s inflation to remain double-digit until the fiscal year ends in June 2023. WB also notes that economic activity and real incomes are expected to be adversely impacted.

What our Market Monitor indicates

Egypt has been on our Market Monitor report since its first publication in mid-June 2022. From mid-July to September, the North African country was at Level Two for two months. Level Two reflects dynamic market conditions where there has been a movement of over 20% in the exchange rate in the past year.

In October, Egypt was dropped from our list of volatile labor markets as the movement in the local exchange rate fell below 10%. Nonetheless, we continued to examine the Egyptian Pound’s exchange rate movement against the US Dollar. Egypt reentered the list in November and remained at Level Two until early January 2023.

In mid-January 2023, Egypt’s level of volatility jumped from Level Two to Level Four. As of the time of writing, Egypt’s exchange rate movement for the past six months is 59.2%, showing sudden and rapidly evolving conditions.

How Birches Group can help

Employers in Egypt should keep a close eye on the local situation, as rapid economic events can drastically impact business continuity.

As inflation rises, organizations must respond proactively to the emerging crisis. In the 15 February edition of our Market Monitor report, we highlight Egypt as a case study of what organizations can do in a turbulent market. Join our mailing list today to learn about our recommendations for special measures in Egypt and other volatile labor markets.

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