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In light of the Corona pandemic, Arab countries have resorted to more loans and the issuance of debt bonds in order to mitigate the impact of their economic crises, but these debts will actually lead to a doubling. charges.
And the British magazine “Economist” claims in a report that since last May, foreigners have invested more than $ 10 billion in local government debt securities offered by the Egyptian Ministry of Finance, in a direction completely opposite to what happened at the start of the spread The Covid-19 epidemic.
The same is true for all Arab countries, as GCC countries issued government and corporate bonds worth $ 100 billion in the first ten months of this year, and in Tunisia, the central bank has rejected the government’s plans to buy treasury bonds in an attempt to revive the economy. and help local investors.
Standard debt ratio
Even before the outbreak of the pandemic, Arab countries had resorted to borrowing to cope with low oil prices and economic stagnation, and the spread of the epidemic had exacerbated the situation, and next year, public debt rates in many Arab countries are said to be at their highest levels in two decades.
In the region’s 11 oil and gas exporting countries, debt stood at around 25% of GDP between 2000 and 2016, and the International Monetary Fund expects that ratio to reach 47% next year. .
In Saudi Arabia, the debt-to-GDP ratio is expected to reach 34%, after being estimated at 17% in 2017, and debt levels in Kuwait and the United Arab Emirates are expected to reach 37% and 38%.
According to the magazine, the situation will be more dangerous in Bahrain, as the debt ratio is expected to reach 131% next year, against 89% in Oman.
Expectations appear negative for the Gulf countries, especially as new shutdowns in both Europe and the United States of America pushed oil prices down in October.
Egypt secured $ 5.2 billion International Monetary Fund loan due to Corona pandemic (Reuters)Corona worsens the crisis
The spread of the Corona virus has spoiled the course of financial reforms undertaken by a number of countries in the region in recent years; in Egypt, for example, the government reached an agreement in 2016 with the International Monetary Fund to obtain a loan. $ 12 billion, a deal that forced it to cut subsidies and impose value-added tax, which led to a decrease in the deficit from 11% of GDP in 2016 to 7% last year .
Egypt was on track to reduce the public debt ratio to 79% in 2021, but the epidemic forced it to obtain a new loan from the International Monetary Fund worth $ 5.2 billion, and its debt should increase next year to reach 91% It is followed by Jordan with 89% and Tunisia with 86%.
For now at least, investors are enthusiastic about Egyptian sovereign debt, yields are high, and the authoritarian regime of Abdel Fattah el-Sisi has allayed fears of political unrest in the country.
But the situation is still subject to change at any time, according to the magazine, and that is precisely what happened between March and May, when at least $ 12.7 billion flowed out of the country.
The magazine explains that in fact, borrowing does not bring great benefits to the economies of Arab countries. In Kuwait, for example, more than 70% of the state budget goes to salaries and allowances in the public sector.
Arab countries were also not generous in spending on economic stimulus measures during the Corona pandemic and allocated 2% of GDP to aid, which is lower than the 3% allocated by emerging markets.
According to the magazine, the loan has helped Arab countries relatively overcome the current crisis, but in return it has exacerbated some problems, with Egypt spending around 9% of its GDP on debt service.
With the continued decline in oil prices and the downturn in vital sectors such as tourism, The Economist believes that the new debts will place an additional burden on Arab governments and limit their ability to overcome economic stagnation.
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