Economies in the Middle East and Central Asia are likely to slow this year as persistently high inflation and rising interest rates bite into their post-pandemic gains, the International Monetary Fund (IMF) said on Wednesday.
The International Monetary Fund’s regional economic outlook partly blames rising energy prices as well as increased food prices for the estimated slower growth.
The report said that while the oil-dependent economies of the Gulf Arab states and others in the region reaped the benefits of higher oil prices, other countries such as Pakistan saw growth collapse after unprecedented flooding last summer or as economic woes worsened.
The regional slowdown also comes as an explosion of fighting in Sudan between two top rival generals who just a year ago as allies staged a military coup that reversed the African country’s transition to democracy threatens the country, which remains on IMF and World Bank debt relief hold.
Rising interest rates, used by central banks around the world to try to stem the rise of inflation, raise the cost of borrowing money. This will affect countries with higher debts, the IMF warned.
This year we are witnessing inflation, which is again the most challenging problem for most countries, Jihad Azour, director of the IMF’s Middle East and Central Asia department, told the AP.
Those with high levels of debt are being challenged by rising interest rates globally as well as tightening monetary policy.
The IMF forecast predicts that regional growth will drop from last year’s 5.3 percent to this year’s 3.1 percent. Overall, regional inflation is expected to be at 14.8 percent, unchanged from last year, as Russia’s war against Ukraine continues to squeeze global food supplies and affect energy markets.
It will be even worse in Pakistan, where the IMF estimated inflation to more than double, to around 27 percent.
Pakistani officials and the IMF have repeatedly negotiated the release of a suspended key tranche of a $6 billion bailout loan to Islamabad.
The IMF has warned that financial conditions around the world will tighten this year, partly due to two bank failures in the United States in March.
The sudden collapse of Credit Suisse before its purchase by UBS also strained markets.
As for Sudan, Azour acknowledged the challenge as the country faces a humanitarian crisis caused by weeks of fighting there. The violence has also exacerbated a debt crisis that has gripped the country for decades as it faced Western sanctions.
We have been working with the Sudanese government for the Sudanese people to help them achieve a debt operation that would allow Sudan to forgive more than $50 billion in debt.
