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World Bank Predicts Coming Public Debt Explosion In MENA Region

The global institute's economic update paints a picture for the region’s economic prospects amid a global economic downturn

05 Apr 2021

Rabat – The World Bank is predicting an explosion of public (also known as government) debt in the Middle East and North Africa (MENA) region following the COVID-19 pandemic. By the end of 2021, the World Bank predicts that the region will face a cost of $227 billion because of the global health crisis and its economic impact.

Governments in the MENA region have borrowed heavily amid the pandemic in order to finance increased healthcare spending and economic stimulus. The World Bank recognizes that this spending is crucial to ensure citizens’ health and economic prospects yet foresee rising debts as a consequence.

While economies and national GDP around the region have dropped because of reduced global economic activity, spending has typically increased as governments have scrambled to keep their citizens healthy and businesses afloat.

The global institution’s report, the first of 2021, highlighted that “the substantial borrowing that MENA governments had to incur to finance essential health and social protection measures increased government debt dramatically.”

On average, public debt in the region is set to increase by 8%, from 46% to 54% of GDP. Those debt levels are still low compared to the US, whose debt is 131,18% of GDP, yet the global superpower is not expected to play by the same rules as developing nations.

In order to mitigate the effects of rising public debt, the world bank has called for a focus on strong institutions as the key to recovery in the MENA region.

Increased transparency will be a factor in a potential recovery in the MEENA region according to World Bank Chief Economist for the Middle East and North Africa Region Roberta Gatti. She stated that “transparency in the use of public information on the spread of Covid-19 and vaccination programs can help accelerate the recovery.”

The World Bank predicts that Morocco’s growth will accelerate to 4.2% in 2021, yet slow growth in job creation for Morocco’s younger population could undermine the recovery.

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