S&P Global Ratings believes sovereign borrowing in the Middle East and North African (MENA) could decrease by six per cent this year after falling 30 per cent in 2017.
This is chiefly because fiscal consolidation measures in all Gulf Cooperation Council (GCC) countries and higher oil prices will likely reduce GCC sovereigns' funding needs, according to a report titled, Sovereign Debt 2018: MENA Borrowing to Decline By 6% to $181 Billion.
• The 13 MENA sovereigns S&P rates are expected to borrow about $181 billion this year from domestic and international commercial sources, down from $11 billion from 2017.
• The decline will result from fiscal consolidation measures across the GCC and the uptick in oil prices, which will likely push down net-oil-exporting governments' financing needs.
• Egypt remains the largest borrower with $46.4 billion, or 26 per cent of the region's gross commercial long-term borrowing, followed by Iraq ($35 billion or 19 per cent of the total) and Saudi Arabia ($31 billion or 17 per cent).
• MENA sovereigns' absolute commercial debt will probably increase by $21 billion to about $764 billion at year-end 2018, up three per cent from 2017.
About 40 per cent of MENA sovereigns' $181 million of gross borrowing this year will probably go toward refinancing maturing long-term debt, resulting in an estimated net borrowing requirement of $108 billion. Adding amounts owed to bi- and multilateral institutions, total debt will likely reach about $860 billion, a year-on-year increase of $13 billion, or two per cent. However, the share of non-commercial official debt is set to decline to 11 per cent of total sovereign debt as of year-end 2018, from 12 per cent in 2017. We expect Outstanding short-term commercial debt (original tenor of less than one year) is expected to fall to $131 billion by the end of this year.