ISLAMABAD: Similar to other regions of the world, the non-financial corporate (NFC) sector in the Middle East, North Africa, and Pakistan has been severely impacted by the Covid-19 shock, with revenues and profits declining at an unprecedented pace at the peak of the pandemic, says the International Monetary Fund (IMF).

The fund in its report, “Corporate Vulnerabilities in the Middle East, North Africa, and Pakistan in the wake of the Covid-19 pandemic” stated that this is likely to exacerbate the sector’s vulnerabilities, which if unaddressed could result in large-scale bankruptcies, with severe consequences on financial stability, employment, productivity, and economic growth.

Going forward, an uncertain path of the pandemic and limited policy space in many of the region’s countries could add to the woes of the corporate sector, which calls for close monitoring of developments therein.

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In this context, it is critical to assess the near- and medium-term impact of the pandemic, notably with respect to liquidity and solvency risks and the extent of viability and “zombification” in the region’s corporate sector. Such an assessment is essential to inform the policy debate on the actions that would need to be taken to mitigate the impact of the pandemic shock on the corporate sector to support the recovery ahead.

This paper assesses the stress on the region’s NFCs in the aftermath of the pandemic shock by projecting liquidity, solvency, and viability indicators under different growth and policy support scenarios over the period 2021-23.

“To this end, we construct a comprehensive panel dataset of nearly 700 publicly listed companies from 6 oil-exporting and 5 oil-importing countries in the MENAP region over the 2002-2020 period,” it added.

Copyright Business Recorder, 2022