File photo: Kristalina Georgieva, managing director of the International Monetary Fund (IMF). AP
Georgieva made her statements within her speech to the Seventh Arab Fiscal Forum which kicked off in Dubai.
Egypt is currently in a 46-month loan programme, under the IMF’s Extended Fund Facility, that aims to tackle the imbalances the Egyptian economy has been facing since the start of the Russian-Ukrainian conflict, sparked in March.
Georgieva also pointed to the ongoing discussions with the Egyptian side, among other countries in the Arab region, regarding a new loan worth $1 billion from the newly established Resilience and Sustainability Trust, adding that the IMF puts climate at the heart of its work and is working with partners to make progress on the climate finance agenda.
Egypt’s anticipated loan is part of the funds Egypt has pledged to secure from the IMF to bridge an expected $17 billion financing gap during the 46-month loan programme deal approved by the IMF for Egypt in December. According to the program, the IMF approved a $3 billion loan to Egypt.
On a regional level, Georgieva noted that economic growth in Middle East and North Africa (MENA) region is projected to drop from 5.4 percent in 2022 to 3.2 percent in 2023 before ticking up to 3.5 percent in 2024.
“The OPEC+ production cuts would reduce overall revenue for the oil exporters. For oil importers, the challenges would continue”, Georgieva added.
Moving to the region’s public debt, Georgieva sated that it is a particular concern, with several economies in the region facing elevated debt-to-GDP ratios—some close to 90 percent.
She also noted that the region’s inflation has surpassed the global average for the 4th consecutive year in 2023, exceeding 10 percent as a result of higher food prices and, in some cases, exchange rate depreciations.
Yet, Georgieva said that the region’s inflation is expected to gradually decline as commodity prices settle and tighter monetary and fiscal policies produce their intended effect.
“Russia’s war in Ukraine and climate disasters could worsen food shortages for the most vulnerable. Add to this persistently high unemployment, especially among young people, and you have a significant risk to social stability. Tighter global or domestic financial conditions could lead to high borrowing costs and, in some cases, a financing crunch. Domestically, delays in much-needed reforms could weigh on regional prospects and government finances. As you see, we face another tough year”, Georgieva explained.
Regarding the region’s climate action financing, Georgieva noted that from North Africa to central Asia governments have identified multi-year financing needs of over $750 billion for these actions. The creation through the right policies and financial solutions of an environment that enables private climate finance is key to meeting these needs , she said.
Georgieva also said that the IMF has provided its members in the region with nearly $20 billion in financial support since the onset of the COVID-19 pandemic. In addition, she said that over $37 billion came to the Arab world from the Fund’s record $650 billion allocation of Special Drawing Rights in 2021.
“We are now working with countries with stronger reserves to channel these assets to countries with greater needs. This also means channeling SDRs to our Poverty Reduction and Growth Trust to continue providing zero-interest loans to low-income countries”, she explained.