Arab states are loading up on debt

TOURISTS MAY not have returned to Egypt’s beaches and historic sites, but the portfolio investors are back. Since May foreigners have snapped up more than $10bn in local-currency debt, reversing a sell-off from the early days of the covid-19 pandemic. There is similar enthusiasm across the region. The six members of the Gulf Co-operation Council issued a record $100bn in public and corporate debt in the first ten months of the year. Treasuries are courting local investors too, though not always successfully: Tunisia’s government was rebuffed when it asked the central bank to buy treasury bonds.

Arab states are on a borrowing binge. Even before covid-19 arrived many were taking on fresh debt to cope with low oil prices and sluggish economies. The pandemic has only increased their needs. By next year public-debt ratios in many of these countries will be at their highest in two decades (see chart). The region’s 11 oil-and-gas-exporting countries owed an average of 25% of GDP from 2000 to 2016. Next year the IMF projects that ratio will hit 47%. Increases are less stark in states without energy resources—but only because they already had high debt levels.