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In the Middle East and North Africa region, financial flows in 2015 went against the global trend

Sun Hwa Song's picture

Now that the 2017 edition of International Debt Statistics (IDS) has been released, as a member of the team who put these statistics together, I thought I would look back at what the data tells us about financial flows into the Middle East and North Africa (MENA) region.

According to IDS 2015 data, net financial flows (debt and equity) to all low and middle income countries were only one third of their 2014 levels ($1,159 billion). In particular net debt flows turned negative (-$185 billion) for the first time since the 2008 financial crisis, while foreign direct investment (FDI) showed a marginal increase of $7 billion from $536 billion in 2014. These phenomena were observed in all regions but MENA.

The net debt inflows into the MENA region diverged from global trends. The inflows increased 84 percent from 2014. On the other hand, FDI recorded its lowest level since 2010.

Debt ratios of MENA rose, yet they remained below those of other low and middle income countries

Historically the ratios of external debt stocks to export and to GNI in the region have been much lower than those in other low and middle income countries, mainly due to the high share of equity in net financial flows and robust export earnings. Although they are still lower, with the recent increase in net debt flows and the decrease in export earnings, the ratios in the region have shown a steady rise. In 2015, the external debt to GNI ratio increased to 16.3 percent from 12.5 percent in 2012, and the external debt to export ratio jumped to 69.5 percent from 42 percent in 2012. The same ratios in other low and middle income countries were 25.8 percent and 97.8 percent in 2015, respectively.

Comparing Egypt and Morocco between 2014 and 2015

Within the region, the net flows trend varied among countries. Egypt saw the largest increase going from a net debt outflow of $3 billion in 2014 to an inflow of $6 billion in 2015. Much of this increase from the previous year can be attributed to a substantial rise in debt flows from official creditors, more specifically bilateral creditors, the largest being the Gulf Cooperation Council countries. In 2014, Egypt had an outflow of $1.3 billion to bilateral creditors, whereas in 2015 the debt inflow from bilateral creditors was $4.4 billion. On the contrary, net debt flows to Morocco decreased by 58% from $2.8 billion in 2015 compared to $6.8 billion in 2014.

Egypt dominated FDI inflows in the MENA region

In 2015, FDI flows to the region fell 8 percent to $14 billion, their lowest level since 2010. However, trends in individual countries were significantly diverse. As with net debt flows, investments in Egypt shot up to $6.9 billion, almost 50 percent higher than the 2014 figure. While Egypt dominated the FDI flows, absorbing 48 percent of the region’s FDI in 2015. Morocco saw a decrease in investment by 29 percent from $3.1 billion in 2014 to $2.2 billion in 2015.