Global inflation will decline to 6.6% in 2023 and 4.3% by 2024.
The GCC countries continue to contain inflation.
Governments in the region have announced multi-year financing needs of more than $750 billion.
The International Monetary Fund has provided nearly $20 billion in financial support to its member countries in the region since the beginning of the coronavirus pandemic.
The Arab world received more than $37 billion as part of the largest allocation of special drawing rights in the history of the Fund in 2021, which amounted to $650 billion.
DUBAI, 12th February, 2020 (WAM) — Kristina Georgieva, Managing Director of the International Monetary Fund, confirmed that global growth is still weak, but it may be witnessing a turning point at the present time.
She added, during her speech today at the Seventh Public Finance Forum in the Arab Countries, as part of the activities of the introductory day for the World Government Summit 2023: After growth rose by 3.4% last year, we see it now declining to 2.9% in 2023, to record a slight improvement in 2023. 2024, when it reaches 3.1%. The Fund announced the latest forecasts two weeks ago, which, although less gloomy compared to October, still indicates a decline in growth, and the fight against inflation remains a priority in 2023.
And she continued: “On the positive side, we are currently witnessing a decline in inflation from 8.8% in 2022 to 6.6% this year and 4.3% in 2024 – although it will still exceed pre-pandemic levels in most countries. the opening of China, the resilience of labor markets and consumer spending in the United States and the European Union.
She said: “While the picture looks promising, negative developments remain the outweigher in the balance of risks. The recovery process in China could be stalled. Inflation may remain above expectations, which requires further monetary tightening – which may lead to sudden repricing in the markets.” Finance”.
She said that with the slowdown in the global economy, growth in the Middle East and North Africa region is also expected to decline – from 5.4 percent in 2022 to 3.2 percent this year, before rising to 3.5 percent in 2024. In oil-exporting countries, Reducing production according to the OPEC + agreement may lead to a decline in overall oil revenues. Challenges will continue in oil-importing countries. Public debt is a major concern, as several economies in the region are facing rising debt-to-GDP ratios – close to 90% in some economies.
She noted that further tightening of global or domestic financial conditions could lead to a rise in the cost of borrowing, and even a lack of funding in some cases. Delay in urgent domestic reforms would place a strain on regional prospects and government resources.
“We are witnessing another difficult year. But there are reasons for optimism. We have solutions to make it a better year. Here, in the region, we can all draw inspiration from the collective spirit of the Moroccan Atlas Lions and their determination at the World Cup in Qatar,” she said.
During her speech, she shed light on three principles that countries can guide in employing fiscal policies to build resilience, with a later focus on ways to cooperate in order to achieve goals in the range of issues that we will only be able to confront together.
And she continued: “The first principle is to put in place a strong framework for managing fiscal policy and dealing with the risks surrounding it. In today’s shock-prone and uncertain world, fiscal policy management has become more important, but also more complex.
She added, “Governments must also manage the many risks to their public finances, including those arising from public guarantees and losses of state-owned companies, which could lead to debt instability and sharp cuts in essential expenditures. Egypt is currently working to strengthen oversight of these risks to help Moreover, several Arab countries are witnessing the implementation of credible medium-term fiscal frameworks, which is a key factor in mitigating risks should they materialize, while also enabling governments to sustain necessary spending, maintain debt stability, and build confidence Investors. The Fund assists its member countries in developing these frameworks, and the set of fiscal risk management tools developed by the Fund helps in detecting risks, measuring their potential costs, and prioritizing the necessary measures to address them.”
The second principle, she said, is to plan and invest in the long term to meet climate challenges. From North Africa to Central Asia, levels of warming in the region are twice as high as in the rest of the world. Beyond the need to reduce greenhouse gas emissions everywhere, we need to act on many fronts. For example, investing in climate-resilient infrastructure and early warning systems is key to strengthening the region’s resilience.
She noted that governments in the region have announced multi-year financing needs of more than $750 billion to take these measures. Meeting these needs depends on creating an enabling environment for private climate finance through sound financial policies and solutions. Here, too, the Fund plays its role. The climate has become at the heart of our work, and we are currently cooperating with our partners to make the desired progress in implementing the Climate Action Financing Plan. This includes the new Resilience and Sustainability Trust Fund, which aims to improve policies and provide affordable long-term financing to address climate challenges. Discussions are already underway with Egypt and other countries to benefit from funding from the Resilience and Sustainability Trust Fund.
She noted that the third principle is the promotion of tax revenues. Investing in a more solid future depends on continuing to strengthen tax policies and tax administration. Many countries in the region have made significant progress in strengthening their tax capacities. However, the average tax-to-GDP ratio, excluding hydrocarbon-related revenues, is still roughly 11% — less than half the possible yield.
She added that the Group of Twenty, headed by Saudi Arabia, and in response to the Covid crisis, launched the initiative to suspend debt service payments in 2020. This was followed by the declaration of the common framework for dealing with debt. But our mission is not over yet, despite the passage of three years. We still need to do more to make the debt-remediation process faster and clearer, and to ensure that all countries benefit from it when needed.
She noted that over the past five years, the GCC countries have made available $54 billion to finance budget and balance of payments needs. It provided support to low-income, fragile and crisis-affected countries in the region, through debt relief and food security support. This includes support announced last year by the Arab Coordination Group of $10 billion. Donor countries can continue to support regional economic stability and growth through multilateral initiatives.
She noted that the International Monetary Fund has provided nearly $20 billion in financial support to its member countries in the region since the beginning of the pandemic. The Arab world received more than $37 billion as part of the largest SDR allocation in IMF history in 2021, amounting to $650 billion.