The World Bank (WB) indicated in a report on Friday that the economics of the Middle East and North Africa (MENA) region will face “rapid accumulation of public debt” due to the COVID-19 crisis.
“The substantial borrowing that MENA governments incurred to finance health and social protection measures increased government debt. Countries must continue spending on health and income transfers, which will add to already high debt burdens and lead to complicated policy decisions after the pandemic recedes,” WB asserted in the report.
It added: “The average public debt in MENA countries is expected to rise 8 percentage points, from about 46% of GDP in 2019 to 54% in 2021. Notably, debt among MENA oil importers is expected to average about 93% of GDP in 2021.”
However, the prestigious organization expressed that the MENA governments will have to increase their social insurance and medical services budgets due to the ongoing COVID-19 situation.
“Consequently, in a post-pandemic world, most MENA countries may find themselves stuck with debt service bills requiring resources that otherwise could be used for economic development,” the report underscored.
On the other hand, the WB reviewed a number of options for solving the issue of increasing public debts including “Expenditure priorities during the pandemic,” “Fiscal stimulus as the pandemic subsides,” and “Mitigating the potential costs of debt overhang in the medium term.”
Finally, Roberta Gatti, World Bank Chief Economist for the Middle East and North Africa Region reflected on the possible solution of the crisis: “Transparency in the use of public information on the spread of Covid-19 and vaccination programs can help accelerate the recovery. In turn, reforms that improve debt transparency and the quality of public investment can be implemented immediately, reducing borrowing costs and raising long-term growth. Simply put, transparency can help chart a path to lasting recovery for the MENA region.”