The MENA region has been hit hard by the Covid-19 pandemic, also in economic terms. With a view to reduce the sever health and social impact, governments of the area have further increased their public debt: the average debt level in the region has grown from 46% to 54% of GDP. Combined with a decline in fiscal revenues and the deterioration of public finances, MENA countries experienced an overall GDP contraction of 3,8% in 2020. Economic prospects, despite recent improvements, remain rather low, with an expected GDP growth of 2,8% in 2021, in a context of uneven vaccination rates which risk further weakening growth prospects. In addition, rising energy prices, while presenting oil-exporting countries with opportunities to regain lost ground, may threaten the fragile recovery of regional importers and might hamper the green transition towards a more sustainable economy.
The pandemic exacerbated long-standing development challenges in the region. Today, additional resources are needed to strengthen the recovery trajectory. Rising debt levels and high servicing costs, paired with the necessary fiscal stimulus, would weigh heavily on public finances. How can the region avoid spiraling into a “debt trap”, and what role could international financial institutions play in alleviating the debt burden of MENA countries? Inflationary pressures and limited fiscal capacities are constraining the room for maneuver of policymakers, which actions should be prioritized to provide the maximum leverage to the economy? No economic recovery would be possible without a rapid and even distribution of vaccines: which solutions can international cooperation offer to speed up and improve this process?