The International Monetary Fund (IMF) has projected an increase in government gross debt by 1.9 percent to 85.4 percent of the Gross Domestic Product (GDP) in 2020 against 83.5 percent in 2019.
According to the IMF report, "Regional Economic Outlook Update: Middle East and Central Asia", it is projected that the government gross debt would rise to 85.4 percent of the GDP in 2020, and decrease to 83.3 percent in 2021.
The IMF Executive Board is scheduled to meet on Thursday (today) to consider Pakistan's request for $1.4 billion loan under the Rapid Financing Instrument (RFI).
However, the report maintained that in April, the IMF granted Pakistan financial support under its RFI.
The total government net debt has been projected at 78.3 percent of the GDP for 2020 against 75.2 percent in 2019 i.e. an increase of 3.1 percent of the GDP.
The fund has projected total gross external debt at 43.8 percent of the GDP for 2020 against 43 percent in 2019 that is an increase of 0.8 percent.
The report stated that a further deterioration of risk sentiment could sharply reduce capital flows to the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, especially portfolio flows, which are highly sensitive to global risk sentiment.
The region's oil importers where fiscal space is constrained, governments could consider re-orienting spending priorities, by reducing or delaying non-essential expenditures, or seeking external financing support or aid.
The IMF is already providing financial support to Jordan, the Kyrgyz Republic, Pakistan, and Tunisia, and debt relief from international creditors to Somalia, giving each country extra policy space to combat the pandemic.
Strong headwinds - the coronavirus disease (COVID-19) outbreak, tighter financial conditions, and weaker growth prospects in oil-producing countries - exacerbate secular challenges facing oil-importing countries in the MENAP region.
The onset of the pandemic has dramatically altered the outlook for 2020.
Average growth in 2020 is expected to contract by 1.0 percent, 4.5 percentage points below 2019.
In addition to the pandemic, this also reflects continued macroeconomic imbalances in Sudan, a temporary slowdown given stabilisation policies adopted in Pakistan, a sovereign default in Lebanon, and effects from slowing growth in key trading partners, and countries sourcing remittances.
Additional demand and supply shocks - through trade, tourism, remittances, tighter global financial conditions, and spillovers on domestic credit conditions, along with confinement measures - would severely curtail trade (Djibouti, Egypt, Mauritania, Pakistan, Tunisia) and net tourism credit (Egypt, Jordan, Lebanon, Morocco, Tunisia) in the region, affecting domestic production and businesses.
Given weak healthcare capabilities in some countries (Afghanistan, Mauritania, Pakistan, Sudan) and reliance on private expenditure of healthcare in some others, scaling up health expenditure (including for migrants and refugees) is needed urgently.
Morocco has chosen to draw on its precautionary liquidity line to help manage needs from the current shock.
In March, the IMF Executive Board approved a new arrangement under the Extended Fund Facility for Jordan and an Extended Fund Facility and Extended Credit Facility for Somalia, after the latter successfully reached the Heavily Indebted Poor Country decision point. In April, it granted Pakistan and Tunisia financial support under its RFI.