LONDON/BUENOS AIRES/COLOMBO, Oct 23 (Reuters) – Gustavo Raul Perez frowns a brow in front of a notebook in the hardware store he has run for six years on the outskirts of Buenos Aires.
Since Javier Milei assumed the presidency of Argentina in 2023 — with Perez’s vote — rapid reforms have excited investors and earned praise from the International Monetary Fund (IMF). Perez, however, is the one who feels the impact the most.
“This economic plan is for the few,” he said.
Inflation has fallen from nearly 300% to around 33%, imports have been liberalized and subsidies have been reduced.
But Perez’s restocking costs have tripled and customers have less money to spend.
“There was a middle class three years ago,” he says. “It no longer exists.”
Perez’s experience reflects a tension running through emerging economies: the reforms that restored investor confidence and stabilized public finances have yet to improve living standards for many.
In Morocco, new and gleaming office towers contrast with frustration on the outskirts of the city. In Sri Lanka, the economic crisis and debt default have eased, but poverty remains above pre-crisis levels.
From removing fuel subsidies in Nigeria to privatization in Egypt and market opening in Uzbekistan, years of reforms have helped emerging economies withstand shocks — but often cause discontent among citizens, who hear talk of economic recoveries that bring them no benefits.
Nigeria’s finance minister warned that failing to address inequality is like “sitting on a powder keg.” Morocco’s central bank states that persistent unemployment has widened the gap between economic performance and citizens’ perceptions.
“When people in emerging markets are faced with rising costs of food, fuel and energy… that is what they feel immediately,” says Torbjorn Soltvedt of Verisk Maplecroft, warning that social unrest and instability may continue. In fact, the global average risk of social unrest this year reached its highest level in almost a decade, according to his firm.
NO OTHER CHOICE
The IMF and investors have long pressed emerging economies to cut subsidies and controls on exchange rates.
The pandemic, followed by spikes in food and fuel prices after Russia’s large-scale invasion of Ukraine, prompted many to act: cutting spending, liberalizing exchange rates and raising interest rates.
The removal of subsidies and the weakening of currencies push prices higher, while spending cuts reduce income — but leaders “had absolutely no other choice,” says Simon Quijano-Evans of Macro Hive, or they would risk a “abyss” of lost investments.
The changes have drawn investors back. Emerging economies now grow around 4%, roughly twice the pace of developed economies.
But if public anger hampers reforms, these countries risk losing more than confidence — a setback could paralyze investment and the creation of jobs needed to close the gap with richer nations.
A WORLD OF TWO SPEEDS
In Morocco, foreign direct investment nearly doubled last year, but violent protests led by young people unsettled the country and, in July, hundreds of potential migrants gathered in a neighboring Spanish enclave.
“Morocco is developing at two different speeds,” said civil engineer Anass Sayad as he walked with his family through Casablanca Finance City. He pointed to stadiums and skyscrapers, saying that education and health deserve more attention. The government increased spending on both areas in its 2026 budget, though any impact takes time to reach citizens.
The World Bank estimates that 1.2 billion people in developing countries will reach working age in the coming decade — which raises questions about whether investments will create enough jobs for them.
GLOBAL CONCERN
The IMF’s managing director, Kristalina Georgieva, warned that higher fuel and food costs and the reduction of development aid were increasing pressure, despite years of “hard work,” while the Fund called for more support to low-income countries.
Anger and unrest are not limited to emerging economies. Cost-of-living pressures have driven protesters into the streets of France, Italy and Spain.
But rich countries have greater fiscal capacity to cushion the impact on families. In developing economies, inflation can also be more severe, with food accounting for 30% to 50% of the consumer price basket, compared with 13% to 14% in the U.S.
In Colombo, Sri Lanka, the food vendor Sirimodara Wadaramge Sriyakanthi wakes up before 5 a.m. to prepare herbal porridge and lunch packs, absorbing the higher costs to keep her prices near $2.
“Selling the lunch packs at a reasonable price so that people can buy them,” she says, worried about her son’s school fees and her daughter’s dance classes.
Sri Lanka may have emerged from the crisis, but for her, little seems to have changed.
“We have so many expenses,” she says.
