{"id":561542,"date":"2021-04-12T03:47:39","date_gmt":"2021-04-12T03:47:39","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2021\/04\/12\/egypt-mena-to-face-higher-financing-needs-post-covid-imf\/"},"modified":"2021-04-12T03:47:39","modified_gmt":"2021-04-12T03:47:39","slug":"egypt-mena-to-face-higher-financing-needs-post-covid-imf","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2021\/04\/12\/egypt-mena-to-face-higher-financing-needs-post-covid-imf\/","title":{"rendered":"Egypt + MENA to face higher financing needs post-covid -IMF"},"content":{"rendered":"

<\/a> Rising financing needs in Egypt and MENA could threaten the post-covid<\/strong> recovery<\/strong> \u2014 and limit the scope for fiscal spending in a region scrambling to rebound from the pandemic, the IMF said in an update to its Regional Economic Outlook for the Middle East and Central Asia. Egypt is classified among the region\u2019s emerging markets whose average public gross financing needs in 2021-2022 are expected to reach 37% of GDP. The IMF is concerned that this could cut into the ability of governments to fund programs designed to get their economies past covid \u2014 and that it could see the private sector have less access to credit as banks plow deposits into lower-risk state paper. Tap \/ click here to read the full report (pdf)<\/a>.<\/p>\n

The IMF revised its 2021 growth expectations for MENA upwards to 4% <\/strong>from 3.1% previously, a sharp rebound from last year\u2019s 3.4% contraction. The IMF last weekcut slightly its growth expectations for Egypt<\/a> this fiscal year to 2.5% from 2.8%<\/a> but upped its FY2021-2022 projection to 5.7%from 5.5%. Egypt reports its GDP figures using the state\u2019s fiscal year, which runs from July to June.<\/p>\n

Financing needs for the region are forecast to hit USD 919 bn in<\/strong> 2021 and 2022<\/strong>, remaining above an average 15% of GDP for most emerging MENA economies, the fund added. For the wider MENA and Central Asia region, the IMF expects financing needs to come in at USD 1.1 tn in 2021 and 2022, which is at least USD 300 bn more than in 2018 and 2019.<\/p>\n

Rollover and refinancing risks are higher in Egypt than elsewhere in the region,<\/strong> given that, at 37% of GDP, we have one of the highest public financing needs in the region and our higher-than-average rate of domestic amortization, the IMF says. External amortizations are at \u201cmanageable levels,\u201d but the median domestic amortization is high at some 10% of GDP a year, and Egypt\u2019s rate exceeds this median at 15% or higher, the lender adds.<\/p>\n

The IMF also wishes Egyptian banks were lending more to the private sector, and less to the state: <\/strong>Egypt\u2019s banks are highly exposed to the sovereign, with nearly 45% of bank lending going out to the government, and this has increased throughout the pandemic, the fund said. \u201cSuch an overexposure is detrimental for domestic debt market development, as well as for the government and the private sector to secure financing at the lowest possible cost among a diversified pool of creditors.\u201d We had more on this last week<\/a>.<\/p>\n

Egypt has been able to push ahead with reform despite the pandemic. <\/strong>The country, along with others that have \u201ckept the course,\u201d now needs to shift its focus to \u201cgrowth-friendly, medium-term fiscal frameworks through which everyone pays their fair share.\u201d<\/p>\n

How well a recovery pans out will largely depend on the vaccination program, which is slowly gathering pace in Egypt. <\/strong>The fund classifies us among the region\u2019s \u201cslow inoculators,\u201d which rolled out programs but have had limited coverage and aren\u2019t expected to vaccinate a significant portion of their populations before mid-2022. By contrast, \u201cearly inoculators\u201d including the GCC and Morocco are racing ahead with vaccinations. \u201cThe recovery has started, but it has started on a divergent path,\u201d Jihad Azour, the IMF\u2019s regional director tells Bloomberg<\/a>. \u201cOur first message is countries need to accelerate vaccinations, give it the first priority. Regional cooperation is welcome.\u201d<\/p>\n

Region-wide, fiscal consolidation should help: <\/strong>\u201cWith the recovery underway, fiscal balances are expected to improve across the region, because of higher revenues and the expiration of pandemic-related measures,\u201d the IMF said in the report. Recovering economies will also likely allow governments to resume fiscal consolidation programs in some countries with high debt levels including Egypt, Iraq, Jordan, Oman, and Pakistan, it added. Meanwhile, central banks in Egypt and other countries with flexible exchange rate regimes should remain accommodative in their policy approach, but only within \u201cwell-anchored inflation expectations,\u201d it suggests.<\/p>\n

Other key points made in the report:<\/strong><\/p>\n