The average public debt in the Middle East and North African (MENA) countries is expected to increase in 2021 due to the COVID-19 pandemic, a World Bank report warned.
The substantial borrowing that MENA governments had to incur to finance essential health and social protection measures increased dramatically, the report noted.
“The average public debt in MENA countries is expected to rise eight percentage points, from about 46 percent of GDP in 2019 to 54 percent in 2021.”
Debt among MENA oil importers is expected to average about 93 percent of GDP in 2021, it added.
The report showed that the region’s economies are estimated to have contracted by 3.8 percent in 2020, which is 1.3 percentage points above the World Bank forecasts in October 2020.
The estimated accumulated cost of the pandemic, in terms of GDP losses by the end of 2021, will amount to $227 billion, it said, expecting a partial recovery in 2021, depending on “an equitable rollout of vaccines.”
“MENA countries will have no choice but to continue spending on healthcare and social protection as long as the pandemic continues.”
Consequently, in a post-pandemic world, most MENA countries may find themselves stuck with debt service bills requiring resources that otherwise could be used for economic development, it stressed.
The World Bank addressed what MENA countries can do to resolve the tensions between short-term objectives and the long-term risks of rising public debt.
It suggested mitigating the potential costs of debt overhang in the medium term, calling on countries to be transparent in their spending and borrowing for COVID-19.