Report highlights growing burden of debt, particularly among oil-importing countries
Sudan is facing a humanitarian crisis for a year. Photo: UNHCR / X (formerly Twitter) A new report by the World Bank paints a concerning picture for West Asian (also known as Middle East) and North Africa (MENA) region. Titled Conflict and Debt in the Middle East and North Africa, the update highlighted sluggish economic growth, mounting debt burdens and heightened uncertainty due to ongoing regional conflicts.
The report forecast a modest increase in regional gross domestic product (GDP) to 2.7 per cent in 2024, a meagre improvement from the 1.9 per cent recorded in 2023. This stagnant growth represented a return to the sluggish economic performance that characterised the decade before COVID-19.
The report identified several factors contributing to the region’s economic woes. Firstly, the ongoing conflict in West Asia continues to cast a long shadow, disrupting trade, investment and overall economic activity. The indirect effects of the conflict, such as rising food and energy prices, further strain economies.
Economic operations in Gaza have nearly ceased, with the GDP of the Gaza Strip plummeting by 86 per cent in the final quarter of 2023. The West Bank has entered a recession, marked by concurrent crises in both the public and private sectors.
The Sudan conflict in North Africa also completed a year on April 15, 2024, which has resulted in nearly 15,000 casualties, eight million displaced civilians and 25 million individuals requiring urgent assistance. Humanitarian organisations have sounded alarms about the looming threats of famine, aid blockades and a rising tally of atrocities committed by all involved parties.
Secondly, the report highlighted the growing burden of debt, particularly among oil-importing countries. With debt-to-GDP ratios exceeding 90 per cent, these nations face challenges in servicing their debts and financing essential social programmes. The World Bank emphasised the need for fiscal discipline to curb further debt accumulation.
The paper also acknowledged the uneven distribution of economic fortunes within the MENA region. While oil-exporting countries benefited from elevated energy prices in 2022, oil importers continue to struggle.
This disparity is likely to persist in 2024, with the forecast suggesting similar growth rates for both groups.
The report stated:
Preventing uncertainty is hard, but preparing for it is possible. Among others, this report highlights the need to address debt transparency. Keeping primary balances in check is important, but only to the extent that they capture the true state of government finances — which they may not if spending is off-budget.
The report provided evidence indicating that oil-importing nations in the MENA region have struggled to escape from debt burdens or mitigate them through inflation, underscoring the necessity of exercising fiscal discipline to mitigate indebtedness.
Notably, undisclosed expenditures, which have significantly impacted some MENA economies, have hindered efforts towards debt and fiscal transparency.
For oil-exporting countries, the primary challenge lies in diversifying their economic and fiscal revenue streams, considering the shifting dynamics of global oil markets and increasing demand for renewable energy sources, the World Bank stated.
In essence, MENA economies must embark on structural reforms, with transparency being a key priority, to unlock growth opportunities and chart a sustainable course forward.
We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.
.png)
Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.