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The “Corona” outbreak lifted foreign holdings in Arab debt instruments after governments borrowed early to cope with the fallout from the outbreak and economic growth slowed as foreign holdings in Egyptian bonds surged to over $ 10 billion.
This is a trend that has affected all parts of the region, as 6 Arab countries have issued a record number of public and corporate debt worth $ 100 billion in the first ten months of the year.
A report by The Economist considered the Corona epidemic as an engine for Arab countries’ increased demand for loans, which began before being affected by falling oil prices and the slowing economy.
The report, reviewed by Al Arabiya.net, predicted that within the next year the public debt-to-GDP ratio in GCC countries will rise to the highest levels of the past two decades.
The average debt size reached 25% of the GDP of eleven Arab oil exporting countries during the period between 2000 and 2016, this percentage could rise sharply to 47% of the GDP of these countries according to International Monetary Fund expectations. and the increase will be less pronounced in Arab countries. Which doesn’t have a lot of energy resources, because some of them are essentially the highest debt levels in the world.
The Economist believes there is no reason to worry, especially as some Gulf Cooperation Council countries have strong central banks, sovereign wealth funds, as well as a low cost of capital, such as the return on slide of Eurobonds issued by Saudi Arabia for 35 years in January / January is less than 4%.
Bahrain’s debt-to-GDP ratio is expected to reach 131% next year, up from 34% on average in 2000 and 2016.
Debt in Oman will rise to 89% of GDP, nearly seven times its historical reference value, and both were largely squeezed out of bond markets earlier this year.
Elsewhere in the region, the outbreak has reversed years of financial reforms, as Egypt reached a $ 12 billion deal with the International Monetary Fund in 2016 that resulted in subsidy cuts and the imposition of a value tax. added.
Reform plans led to a reduction of the deficit from 11% of GDP in 2016 to 7% last year, and Egypt was on track to reduce its debt ratio to 79% in 2021. However, the epidemic returned it to the International Monetary Fund to obtain a Reserve Agreement worth $ 5.2 billion. Next year, its debt is expected to return to 91% of GDP. Jordan will lag behind by 89% and Tunisia by 86%.
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