The International Monetary Fund today called on the countries of the Middle East and Central Asia to reduce their need for financing, warning of the growing government debt, which has been exacerbated by the Corona pandemic.
"The recovery has begun, but it is mixed and there is a blur," Reuters quoted the director of the Middle East and Central Asia Department at the Fund, Jihad Azour, adding, "The blurry outlook stems from the persistence of the pre-pandemic legacy, especially in high-debt countries.
Azour said: The first countries to vaccinate, which include the oil-rich Gulf countries, Kazakhstan and Morocco, will reach the levels of GDP for the year 2019 next year, while the recovery to those levels will take another year in other countries.
According to the Fund's latest regional and economic forecasts, "high financing requirements could restrict the policy space needed to support the recovery after the crisis prompted many countries to borrow, taking advantage of the abundance of liquidity in global markets to increase spending to mitigate the consequences of the pandemic."
He added that financing needs are likely to increase by an estimated $ 1.1 trillion over the next two years, which poses a threat to financial stability and may lead to a slowdown in the economic recovery.
He added that although comfortable reserve levels provide support to emerging markets in the region, exposures are greater for countries with high external debt and limited financial space, calling on countries to implement policies and reforms to contribute to reducing the total high public financing needs and reducing the sovereign exposure of banks. He also recommended coordination between financial and monetary authorities. As well as deepening the local debt markets and expanding the investor base.
Expectations indicate a great degree of uncertainty, and recovery paths will vary depending on the speed of vaccination campaigns and the extent of reliance on the most affected sectors, such as tourism and countries' financial policies.