Beirut, 25 November 2024- External debt servicing in Arab middle-income countries took up over 15% of revenues in 2023, compared with about 7% in 2010, and reached a record $40 billion in 2024. In low-income countries, debt servicing crossed over $1 billion in 2023-2024. These are some of the key findings of the "Debt and Fiscal Outlook Report for the Arab Region" issued by the United Nations Economic and Social Commission for Western Asia (ESCWA).
Launched during the two-day "Regional workshop on developing debt optimization strategies to enhance fiscal space and finance the SDGs" in Amman, the report is the first of its kind for the Arab region as it takes a comprehensive look at different finance flows, including debt, domestic resources and emerging innovative instruments.
From 2010 to 2023, the real value of regional GDP rose by about $791 billion, while outstanding public debt in real terms ballooned by $880 billion in the region, according to the report. Although economic growth remained largely below 3%, the cost of borrowing from the market persisted above 5% for both domestic and foreign currency debt in middle-income countries.
"Fiscal management is key to influencing trends in fiscal balances and public debt. In 2023, Arab middle-income countries could have retained over $1.8 billion on interest payments on market debt if the average interest rate for emerging market economies globally was applied," stressed ESCWA Executive Secretary Rola Dashti.
The report is intended to help policymakers become better positioned to meet current and future challenges through greater fiscal and economic resilience, and more inclusive development overall. It also seeks to contribute to discourse, including globally, on sustainable finance and the institutional capacities and policy frameworks that underpin long-term development.
In 2023, total public revenues in the region reached 32% of the gross domestic product (GDP) on average, according to the report, compared with 26.5%, on average, for emerging market economies, and 35.5% for advanced economies.
"If Arab middle-income countries boosted the share of personal and corporate income taxes to 6% of GDP, the average for middle-income countries globally, they could generate an additional $14 billion and distribute tax burdens more equitably," Dashti added.
The report outlines other measures in an actionable agenda to increase fiscal space, including three broad strategies: optimize debt portfolios, enhance the efficiency of public revenues and expenditure frameworks, and increase the use of innovative financing mechanisms and sustainable financing frameworks.
