Egypt, Tunisia and other oil importers in the Arab world have almost run out of cash, the IMF warned yesterday.
They need an urgent injection of US$90 billion (Dh330bn) to cope with fiscal deficits, sluggish growth, rampant unemployment and high oil prices, said Masood Ahmed, the director of the IMF's Middle East and Central Asia.
The IMF still has about $35bn available to assist these countries but the rest of the money will have to come from other donors, he said. But the euro-zone crisis would limit governments' ability to tap capital markets for funds, he said.
"Last year was generally a difficult year across the region for the oil-importing countries and at the end of it they face an equally challenging year but less space to be able to offset the impact," he said at the launch of a regional outlook report yesterday.
Egypt and Tunisia have been struggling to balance complex political transitions with the need to mend economies dented by civil uprisings that ousted four regional leaders. Fresh demands for faster change from citizens and a retreat of foreign investment have added to the challenge.
Economies are also being hit by higher oil prices, which are raising their outlays on costly fuel subsidies.
As much as $200bn was spent by countries in the Middle East and North Africa to offset the impact of rising oil prices on citizens, Mr Ahmed said.
He said subsidies only benefited the top 20 per cent in society and, instead, governments needed to bring in targeted social safety nets to help the poorest.
The total external and financing needs of regional oil importers this year and next year is projected at about $90bn and $100bn, respectively, the IMF said.
"Capital markets are likely to provide only part of these funds and timely official financing will be critical," the report warned.
The IMF has been in talks with Egypt's government about a $3.2bn loan to help shore up its fiscal needs this year.
But a deal has so far stalled as the military rulers struggle to get support from all political groups for a package of reforms including cuts to subsidies and tax hikes linked to the loan.
Mr Ahmed yesterday said more progress was still needed before the loan was signed off.
"There is still a little bit of work to be done to get to the point where we could say to our board that this is a programme that has the kind of support that we could confidently feel will lead to its implementation," he said.
Egypt requires the funds to help plug a widening budget deficit and go towards a projected financing shortfall of $11bn over the next two years. Egypt hopes the loan will tempt other foreign donors, including GCC governments, that have yet to follow through on pledges for loans.
Mr Ahmed said the IMF was also in talks with other regional countries about their financing needs, which might result in support from the fund.
Oil-importing nations were generally less competitive than regional oil exporting nations and other emerging markets, he said. As a result, they need to move ahead with reforms to encourage foreign investors.
Creating jobs remained a key priority for the region, he said. Lower growth in domestic economies due to the unrest and less trade and tourist links with the euro zone meant incomes had stagnated and more young people were out of work, the report said.
"Unemployment has been driven by demographics but also because growth has not been high enough to create jobs," he said.
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