Middle East and North Africa
External debt and resource flows 

Debt and Indicators
Aggregate resource flows
Key indicators

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The Middle East and North Africa was relatively untouched by spillover effects of the East Asian financial crisis. A number of countries continued to implement adjustment programs that have reduced fiscal deficits, lowered inflation, and addressed some of the structural reforms required for long-term growth. Although poor weather and a decline in oil prices reduced the average growth rate of output in the region from 5.0 percent in 1996 to 3.1 percent in 1997 (0.5 percentage point above the population growth rate), improved confidence led to a strong rise in external finance. Aggregate net long-term resource flows rose to $17 billion, compared with $7 billion in 1996, because of a $10 billion increase in private debt flows. Debt increased to 115 percent of exports, compared with 111 percent in 1996, and net transfers rose to an estimated $9 billion, after negative net transfers in 1995–96. Despite the sharp increase in private financing, private debt accounted for just 32 percent of total long-term debt in 1997, reflecting the region’s limited participation in the surge in private lending received by Latin America, Eastern Europe, and East Asia since the early 1990s.

Debt and Indicators

EXTERNAL DEBT INCREASES. The region’s long-term debt outstanding rose 3 percent in 1997, to $166 billion. While official debt accounted for 68 percent of the total, the main source of the increase was private debt, which rose to $53 billion compared from $45 billion in 1996. At the end of 1997, the region accounted for 10 percent of the outstanding long-term debt of developing countries. Despite the significant increase in private nonguaranteed debt during the year, about 95 percent of the region’s long-term debt was owed or guaranteed by governments,

DEBT INDICATORS ARE MIXED. The debt service ratio remained at 11 percent in 1997, well below the average for developing countries. Export receipts fell by only 1 percent despite the appreciation of the dollar and the 6 percent decline in oil prices. The average debt to exports ratio rose from 111 percent in 1996 to 115 percent in 1997, because of the sharp jump in private borrowing in 1997. Yemen agreed to a concessional restructuring of its debt to Paris Club creditors on Naples terms, while Jordan reached a Paris Club agreement on Houston terms.

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Aggregate resource flows

Net resource flows to the Middle East and North Africa rose to an estimated $17 billion in 1997, compared with $7 billion in 1996 and an average $8 billion a year in 1990–95. The sharp increase in 1997 was largely due to the rise in private debt flows.

NET PRIVATE DEBT FLOWS JUMP. Net private long-term debt flows shot up from near zero in 1996 to $10 billion in 1997, with Algeria, Egypt, and Lebanon registering significant increases in net flows. Access to bond markets remained limited to 5 countries, with Lebanon the only issuer above $1 billion. Commitments of syndicated loans to the region surged from $2 billion in 1996 to about $11 billion in 1997. By far the largest commitments ($5 billion) came in the fourth quarter.

EQUITY FLOWS UP IN 1997. Equity flows increased from $2 billion in 1996 to $4 billion in 1997. The major shift was in net FDI to Saudi Arabia, from –$1.1 billion in 1996 to $400 million in 1997. Net FDI to Egypt, Lebanon, Morocco, and Tunisia rose by $400 million to almost $2 billion, and these four countries accounted for three-quarters of FDI to the region. Net portfolio equity flows equaled $1.5 billion in 1997, about the same as in 1996. Of this, international equity issues (global depository receipts and American depository receipts) accounted for $700 million (Bahrain and Egypt were the main recipients) and direct investments in the region’s stock markets accounted for $800 million.

A TRANSFORMATION IN PRIVATE FLOWS. The increase in private flows in 1997 reflects a sharp change in the level and composition of private lending during the 1990s. During 1990–95 the region depended on FDI and official concessional flows for its external finance. Net official flows (almost entirely in the form of grants and concessional loans) accounted for 70 percent of the region’s long-term external finance, FDI averaged less than $2 billion a year, and net long-term private debt flows were almost zero. In 1996—97 a sharp rise in private flows transformed these trends. In 1997 net official flows accounted for just one-fifth of net long-term finance, and private debt flows were more than twice the size of equity flows (despite the addition of portfolio equity flows, which were practically nonexistent to the region in the early 1990s).

OFFICIAL DEVELOPMENT FINANCE DECLINES IN 1997. Net flows of official development finance were estimated at $3.5 billion in 1997, down from $5 billion in 1996. This represents a significant recovery from the $2 billion average of 1994–95 but is well below the $7 billion a year received in the first few years of this decade (in part due to assistance provided after the Gulf war). Most official resources to the region are in the form of concessional finance, including $3 billion in grants and $1 billion in net concessional lending. Net official nonconcessional lending equaled –$1 billion in 1997, compared with zero in 1996.

Key indicators
Billions of U.S. dollars

a. Preliminary.

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GNP per capita, 1996: $2,070

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