Transcript

Transcript of the Press Conference on the Regional Economic Outlook Update for the Middle East and Central Asia

July 13, 2020

SPEAKERS:

Jihad Azour, Director, Middle East and Central Asia Department, IMF

Athanasios Arvanitis, Deputy Director, Middle East and Central Asia Department, IMF 

Wafa Amr, Senior Communications Officer, Communications Department, IMF

MS. AMR: Good morning, good afternoon, everyone. Thank you for joining the press briefing on the Middle East and Central Asia Regional Economic Outlook. Today we will take your questions online. My name is Wafa Amr, and I'd like to introduce Jihad Azour, Director of the Middle East and Central Asia Department. We also have with us today as well Athanasios Arvanitis, Deputy Director of the Middle East and Central Asia Department.

We will begin with Jihad Azour giving opening remarks and then we will take your questions. Please send us your questions at the Press Center so we can read them out during the press conference. Jihad, please.

MR. AZOUR: Thank you, Wafa. Good morning and good afternoon, everyone. And thanks to all of you for joining us virtually as we release our update to the regional economic outlook for the Middle East and Central Asia.

As you may know, it's not typical for our department to release a summer update to our outlook, but in times that we are, anything but typical, we believe that it is vital to provide policymakers and the public with our data and analysis as soon as possible.

As the COVID-19 swept the globe, MCD countries took unprecedented steps to save life, mitigate damage to their societies, and sure up their economies. Authorities moved swiftly and resolutely to impose strict containment measures, among the most stringent world-wide, and bolstered their health and emergency response capacities. These actions have helped limit the spread of the infection and kept fatality rates relatively low compared to some other regions in the world.

These critically important policies vital for public health came at a significant economic cost. Hence, growth forecasts for the region were revised down with the overall growth now projected at -4.7 percent in 2020 which is two percentage points lower compared to our previous economic outlook in April.

Looking more closely at the Middle East, North Africa, Afghanistan, and Pakistan region, the sharp decline in oil prices together with oil production cuts among oil exporters, and also disruptions in trade and tourism added further headwinds. As a result, growth in MENAP region is projected to drop to -5.1 percent in 2020, two percentage points less than in April.

The double whammy of lockdown and severe oil price fluctuations are costing MENAP oil exporters $270 billion in oil revenues this year. As a result, the growth forecast for this group has been marked down and is now projected to be -7.3 percent in 2020, a 3.1 percentage point drop from our previous April forecasts.

Moving to the MENAP oil importing countries who have benefited from lower oil prices, they are feeling the impact of the reduced rate, tourism, and remittances in addition to the effect of the lockdown measures. Our growth projections for the oil importers is now -1.1 in 2020, largely unchanged compared to our latest update in April. However, there are notable differences among countries, and with some suffering more than others from the varied shocks.

Let me now move to Caucuses and Central Asia. In Caucuses and Central Asia, we expect a somewhat sharper contraction. We know project growth to be at -1.5 percent in 2020, and a weaker recovery next year at 4.4 percent. This revision is largely due to more sluggish expectations for the regions oil importers who have been hurt by lockdowns, trade slowdown, tourism collapse, and a significant drop in remittances.

The sharp reduction in remittances is expected to strongly affect the fragile and conflict affected states, given that it's the main source of income for this group, and they account for about 14 percent of their GDP. With a project 13 percent drop in output on average, per capita GDP in these countries is expected to drop significantly from $2,900 last year, to $2,000 this year.

The period ahead will be marked by high uncertainty amid the unclear shape and the speed of the global recovery. Risks of a second-round pandemic with more protracted impact are elevated. Therefore, navigating the uncertainty in the period ahead will require agility and preparedness. With most MCD countries gradually starting to reopen, notably those who have imposed more stringent restrictions, the likelihood of resurgence in infection remains high.

As the crisis starts to abate, policymakers will have to tackle its legacies. First, ensuring strong and resilient health systems remain the most urgent priority. Increasingly, policymakers should turn their attention to supporting the economic recovery and setting up well-targeted social safety nets. When the threat of COVID-19 begins to diminish, countries are encouraged to gradually rollback emergency measures and implement new policies to assist where necessary the reallocation of resources.

Looking beyond the crisis, rebuilding buffers, and boosting reserves will be critical as policymakers turn their focus back to building inclusive and prosperous economies with strong social systems. Multilateral support can be a crucial component of the recovery, and as countries continue to grapple with unprecedented shocks of recent months, the role of international institutions is important.

The IMF is actively supporting the region through policy advice and financial support. We provided nearly $17 billion in financing to 15 countries while working with others who have requested relief. As we continue navigating the difficult road ahead, the IMF remains a steadfast partner to all countries in the region as we, together, work to save lives and rebuilds economies. With that, thank you very much for joining us today. And now, I'm very happy to take your questions. Thank you very much and back to you, Wafa.

MS. AMR: Thank you very much, Jihad. We have questions on several countries from several journalists. The first question is from Egypt.

MR. AZOUR: In this country we took in reducing the impacts of the pandemic on the Egyptian economy. The Egyptian economy, of course, is based on important sectors like tourism, the industrial sectors, and the revenues of the Suez Canal. So, all these were impacted by the pandemic. The authority in Egypt requested a support by the IMF from two programs and were able to get around $11 billion of assistance.

MS. AMR: In light of the situation in Tunisia, what are the measures that need to be taken to end the contraction, the other question, what is the IMF asking Tunisia to do to get a loan, and what are the most important proposals for the future, thank you.

MR. AZOUR: The government adopted a set of measures to alleviate the impact of this pandemic. But, of course, the Tunisian economy suffered as a result. The IMF gave Tunisia some support, 100 percent of its quota share, and this assisted the Tunisian government in adopting measures to elevate the preparedness of the health system, and to protect the economic institutions, the small and medium institutions.

The IMF supports Tunisia. There were consultations with the Tunisian authorities on this issue. The IMF is now helping the government to implement its program. What's important in this program is there should be a need for a domestic dialogue, and it should focus on three main issues. Protecting the lives of the people which requires certain measures, second, to support the handling of problems in certain areas, and the third is to provide support for economic transformation to create more jobs, and to give the government a chance to provide incentives, and the private sector to benefit.

The IMF is a constant supporter of Tunisia. We have had many programs in the past few years, and IMF is ready if the Tunisian government requests a new program to begin discussion on this issue.

MS. AMR: Questions on Jordan. How do you assess Jordan's reform process in light of multiple challenges the country is facing amidst coronavirus? And what's your take on Jordan's crackdown on tax evasion?

MR. AZOUR: Well, let me first say that Jordan was among the most effective countries in dealing with the coronavirus. They took very strict and stringent measures to protect lives, and also to protect their economies, reaching one of the highest levels of stringency in fighting corona. And this helped Jordan to gradually, and faster than others, to reopen the economy.

The Jordanian government is embarking in a wide range of reforms that, as you know, the Fund has supported with a program back in March. This program has, of course, been adjusted in order to take into consideration the emergency needs with the coronavirus. This program has important pillars.

One is to strengthen the foundations of the economy to create more jobs by improving business environment by creating an efficient tax system that is progressive and also tackles all the inefficiencies by also working on increasing productivity, reducing labor costs, reducing, also, financial costs, harmonizing tax regimes, and also by reforming the energy sector. That constitutes an important element, both in terms of fiscal sustainability, but also for the competitiveness of the Jordanian economy.

The Fund, in addition to the program, has provided an emergency facility also to Jordan in order to address the implications of the coronavirus. Of course, this shock will impact many countries in the world, including Jordan who has, in addition to all of that, been hosting refugees and also dealing with efficiency in the coronavirus fighting also for the refugees. We encourage the Jordanian authorities to keep on implementing the program, accelerate the reform of the energy sector, and use this coronavirus shock as an opportunity to strengthen and accelerate their economic transformation.

MS. AMR: Thank you. Also on Jordan. How could we determine the amount of the rapid credit facility, and is there any monitoring of the implementation of this program? And what about the most recent program with the IMF and Jordan?

MR. AZOUR: Thank you very much. There are three questions. What's the difference between the rapid help facility and the regular program? As you know, immediately after the global economy entered into this crisis, we allocated $100 billion as rapid support for countries that need rapid financing to elevate the preparedness of the health systems to deal with this global pandemic. Seventy countries requested help and many of them obtained help from the IMF in the region. Some countries requested that help and they got that help.

This kind of program provides rapid financing to allow more expenditures and to support the balance of payment. There has to be an ability for these countries to pay off this loan. There is no other condition, but it's important for there to be monitoring and implementation mechanisms to make sure there is transparency because this fund is supposed to go into the health sector. Jordan created a new part in the balance sheet for this kind of expenditure and entered that item into the Jordanian treasury. And on the website, identified the criteria needed for tenders to provide more transparency. It's important to standardize such an approach.

The other programs are programs that support economic activities or support reform agendas adopted by different countries. Based on the Jordanian government's reform program, this program was endorsed, and the next revision will be in the next few months. The purpose of that program is different. The goals of programs are different. Each program has its own mechanism, its duration. For instance, the Jordanian program was for four years. In Egypt it's one year. The aim is to keep up with the economic reform activities in certain countries.

MS. AMR: We have two questions. Is the double whammy of COVID-19 and demand destruction for energy likely to stay with the Gulf energy exporters through all of 2020 and spillover into 2021?

MR. AZOUR: John, thank you for your question. In 2020 we saw a massive drop in oil price, to levels that we didn't see in the last two decades. In these terms, we reached rates that we didn't see since 1973. Therefore, with the cut in productions after the extension of the OPEC+ agreement had very strong impact on oil revenues. We project that oil revenues for oil exporters, in particular GCC, to drop by more than $270 thousand billion this year.

Of course, the price of oil has recovered. In the last few days, we reached a level of $43 a barrel, but we are still far from the $68 a barrel that we had at the beginning of the year. We're still at least 30 percent lower. The recovery in oil price will be dependent on various factors. The first is the demand. The demand has been playing an important role, and the uncertainty about the recovery globally is affecting the expectations about the demand, especially that trade is expected to drop this year by more than 12 percent globally.

The second factor is the production. And we are waiting for the OPEC+ negotiations to see if the agreement that has been extended until the end of July will be extended further. Also, a third factor that plays an important role is the level of consolidation we're seeing on the shale oil industry. Last, but not the least, the level of reserves.

Therefore, all these elements play into the composition of the price, and this is why we're seeing a high level of volatility currently still in the oil market. Yet, the expectations for the oil price to remain in the corridor of $40 to $45 which means that the impact, the negative impact on the oil sector for this year will be deep. We expect a drop in the oil GDP this year for the GCC to exceed to 7.3 percent as a negative growth this year with a potential recovery to 3 and 3.5 percent in 2021.

MS. AMR: Thank you, Jihad. We go to John's second question and it's more on the MENA region. How are the larger countries of the MENA region able to financially contend with a second wave, such as Iran and Iraq? You already spoke about Egypt.

MR. AZOUR: Well, the situation is different between oil exporters and oil importer countries. Egypt is an oil importing one, and Iran and Iraq are oil exporting ones. Iran’s economy has been suffering over the last few years because of the impact of the sanctions, and also Iran was one of the first countries to be affected in the region by the COVID-19. And the outbreak was massive and lead to very stringent measures by the authorities in parallel to additional stimulus measures that the government put forward.

Of course, the drop in oil price did not help and Iran will face, for the third year, negative growth, and background of high level of inflation. Therefore, in Iran it's very important to address healthcare issues first by keep investing and expanding the support to provide additional health capacity and social protection and the government has introduced a fiscal stimulus package of 6 percent of GDP. This is a step in the right direction. But it's also important to address the issue of exchange rate that has been falling, and multiple exchange rate, and inflation. And the step forward is to unify exchange rate, address some of the fiscal issues, and financial issues that needs to be reformed in the system and gradually allow the Iranian economy to regain its level of production.

The Iranian economy is more diversified than others, and the size of the oil sector is smaller, which is not the case, for example, for Iraq. Iraq, the oil sector is very important. More than 90 percent of revenues, of government revenues in Iraq come from oil. The size of non-oil sector remains very small.

In the case of Iraq the outbreak of the coronavirus has had an impact, and the authorities recently increased the level of measures to rein in and control the spreading of the virus. For Iraq, it's very important also to move on three steps. Step number one is protect lives for their citizens, especially in Iraq we still have an important number of internally displaced and vulnerable groups. It's very important to address the issues of those.

The second important pillar is to stabilize the economy, especially that the level of erosion in public finance has been rapid over the last few years. And three, for a country that is dependent on oil, but yet has a lot of other potentials to offer, is to work on increasing those. For example, agriculture, industry, are sectors that can provide Iraq with capacity to increase the size of the economy but also to create jobs.

It's very important for Iraq to be careful of how to address the public finance situation, and the financing of the Treasury for the next couple of years.

MS. AMR: Thank you. We do have questions on the UAE.

What are the projections for the UAE economy, and did that change from April? And what are the recommendations for the UAE as well? What shape of recovery is expected for the UAE?

MR. AZOUR: Well, first of all the UAE economy is the second largest economy in the GCC, one of the most international economies in the whole MENA region. And therefore, it was affected by the double whammy of the coronavirus shock and the drop in oil price. I think the positive element comes from the fact that authorities reacted very quickly and swiftly in addressing the spreading of the coronavirus, and have introduced pioneer measures in terms of controlling the spreading, increasing the number of testing, and introducing technology as a way and mean to address and to contain the spreading of the virus.

This has helped the UAE to gradually open up their economy. Of course, this shock will have an impact on the oil sector that is important in UAE, and well as also on the non-oil sector, and we expect like other GCC countries that growth projections this year will be lower than the one we published last April.

But I would say here, two additional elements: one, UAE was able to regain access to the market, and we saw that with Abu Dhabi reaching a successful Eurobond transaction a few weeks ago. And also, we saw reorganization of the response level, with the government learning from the first lessons in order to provide a more efficient and effective way of addressing the COVID-19 shocks.

Of course, there are some risks to certain sectors that are exposed internationally, like tourism, like airline and transportation, those would require special attention.

Going forward, it's important for the UAE economy, the investment that has been put in saving lives, expend the utilization of technology in addressing the virus, but also in providing new opportunities, and this is one of the silver linings, that we see with this crisis: to increase access to finance, to increase access to support to SMEs. The central bank has introduced and important package in this direction.

It's important to keep in this direction, while also making sure that the stability of the financial system is protected. It's also important to keep the transformation of the government-related entities to make them more competitive. And also, last but not the least, it's important to think about the new diversification strategy that will allow the UAE to maintain its leading role in growing the non-oil sectors especially in the last decade we saw a fast-growing of various activities outside the oil industry.

MS. AMR: Thank you. And their questions on the GCC are also: What are the projections for the GCC region, the risks and recommendations for oil exporters in the region? And whether you have an estimate for the fiscal balance and need to refinance for GCC in dollars?

MR. AZOUR: Well, of course this shock has an impact on most of the GCC countries, although GCC countries have different level of buffers and access to liquidity, and therefore the way they have dealt with the crisis, and the way this crisis affected the economy is different.

We expect growth to be negative this year by 7.3 percent, and it's both in the oil sectors as well as also in the non-oil sector. In terms of impact on budget deficit and external account, yes, those two sectors are the most affected. We expect deficits to reach levels of 8 to 10 percent on average this year. But the good news is the non-oil fiscal balance is showing more resiliency than the overall balance.

Of course, those countries were affected by the return on capital flows that we saw in the beginning of the crisis, but they regained access to international capital markets and they were able to finance at relatively acceptable rates with ample demand their financing need for this year.

MS. AMR: Thank you. We will move to Lebanon. So, to start with the first question: Is there a suspension of the discussions with the authorities and what is the IMF's position?

MR. AZOUR: Well, as you know discussion with the authorities continue. They have started after the request by the Lebanese authorities, based on the program that was approved by the cabinet, to have Fund assistance. The IMF team started the discussion with the authorities, and the discussions are ongoing.

The last session took place last week, on Friday, and the purpose of this session was to look into the details of the reform plan for the electricity, and energy sector, which constitute an important part of the government plan. Of course, Lebanon is enduring one of the most severe crisis where the strong contraction in the economy as well as also high level of inflation. This crisis has been compounded by the COVID-19 shock that also affected lives and livelihoods and Lebanon was also one of the countries who succeeded to rein in and control the pandemic.

The IMF Team is currently discussing the authorities the various components of the plan on the issues related to the financial sector and the determination of the level of loss on the fiscal reforms, as well as also on the structural reforms, and last but not the least also on the social protection part of the plan.

MS. AMR: Thank you. Athanasios Arvanitis, Deputy Director of the Middle East and Central Asia Department, will now take the rest of the questions on Lebanon.

One of the questions is: What is the status of the talks, is there a breakthrough, and what are the key challenges, what are the risks? Apparently talks with the IMF have stalled, and there is no significant progress in terms of an agreement on a rescue package to save the Lebanese economy. Is that correct? What does the IMF rescue package hinge on? And what are the chances of Lebanon surviving without IMF aid?

MR. ARVANITIS: Thank you, Wafa. And these are several questions so I'll try to break them down. I think Jihad has provided already an answer on what is the status of the talks with the Lebanese authorities. So, let me start by answering the question on what are the key challenges in the discussions.

Lebanon faces several interrelated challenges, as underlined problems here have been allowed to persist for many years. Public debt is unsustainable, the fiscal framework and the tax administration are weak, and the banking model is unviable. The state-owned enterprises are loss-making and provide inadequate services to the population. And the economic base, generally, is too narrow and uncompetitive.

These are very complex issues that require common assessment of the size of the problems and a strategy to address them in effective manner. As we have stated in the past, we believe that their government's original plan went in the right direction. It provided an assessment of the challenges and estimate of the financial losses that we are broadening the right order of magnitude, and propose a comprehensive plan to address them including in terms of public debt sustainability, and also financial sector restructuring.

At this point for productive discussions to continue, it is very important that the authorities unite around the government's plan. From our side, we're ready to work together with authorities to improve the plan where this is necessary.

However, we're also worried that attempts to present lower losses and postpone difficult measures into the future would only increase the cost of the crisis by delaying the recovery and also hurting particularly the most vulnerable.

Let me now take the second question that goes: What is the IMF's position, what the IMF solution is for Lebanon? We believe that an economic reform program needs to stop the immediate deterioration of economic conditions, support the most vulnerable from the impact of the crisis, and lay the conditions for sustainable growth.

In this regard the program in our view needs to offer a comprehensive strategy to restructure public debt, strengthen the fiscal framework, recapitalize the banks, reform key parts of the economy, particularly the state-owned enterprises, and improve, importantly, governance and transparency.

Given the impact of the crisis from Lebanese people, it's also important, as Jihad said, to expand the social safety net to protect the most vulnerable. Beyond agreeing on this strategy I think it's essential also for the authorities to begin implementing critical economic reforms to immediately stop the worsening of economic conditions. This includes, in particular, passing the capital controls law, and also begin to take steps to restore fiscal and debt sustainability, including with the 2020 budget.

Now there was also a question about: Can Lebanon do without an IMF program? At this moment, our efforts are focused in helping the authorities formulate a reform plan to appropriately address the current challenges and restore sustainable growth. We hope that the discussions continue in this direction, and we are available to the authorities to continue to provide technical advice as they see needed. Thank you.

MS. AMR: Thank you very much, Thanos. Given the IMF sees worsening poverty across the region, potentially rekindling social unrest, which countries are you most concerned about? What should governments to limit that risk?

MR. AZOUR: Well, t's of course one of the key challenges that the region was facing prior to the COVID-19 shock. And one of the takeaways of this crisis is we saw that certain number of vulnerabilities were exacerbated.

I will cite a few of them, one is the informality in the economy that was providing some resiliency in the past, proved to be one of the weak points, especially it did not allow in certain cases, the opportunity for governments who have introduced several measures to reach out to those groups, and in certain cases countries had to invent new techniques, like for example, in Morocco, or in Tunisia, or in Jordan by finding ways, using electronic means in order to reach out to this group.

The second vulnerable group are the youth and women. We have been, at the Fund, focusing on those priorities for the last years, considering that given the high level of unemployment at the youth level, and limited participation of women in the economy, there is great potential here that is untapped. And by increasing this level of participation, we can grow the economy, and several studies that we did and others did, showed the importance of that.

And this is still an important element in the recovery to make sure that we account for those who are, on one hand, vulnerable but also on the other hand, they could constitute the opportunity for the region in the future.

The third category of vulnerabilities are the internally displaced, the refugees, who are facing hardship of their life but also the very weak quality of infrastructure. To give you an example, in a country like Yemen, we have 0.7 beds per 1,000 persons; while, the average should be 2.7 percent. Therefore, the quality of the infrastructure, especially when you have this level of vulnerability is high.

Those are important elements, and this is why we believe it's very important that this recovery takes into account a new social protection model. A social protection model that expands the coverage, builds a certain number of social safety nets, but also use certain new instruments like training, capacity building in order to provide new job opportunities, especially that certain sectors will not recover soon, and those sectors are usually job rich.

Therefore, it's a moment to look broadly and also to look systematically of the social component of any economic recovery. Two positive elements here to take into consideration: one, this recovery can be built around technology, especially, we have more than 65 percent of the population of the Middle East below 30 years, and this is an important asset that the region can use.

Meaning, the recovery is also something that could help reduce risks on water that is one of the main issues that the region is facing. Allow agriculture to become also a sector that produces not only support to livelihood but also now with the food security issue, potential growth in this sector.

Also it's very important for the partners of the region to help: countries like Morocco, Tunisia, Algeria, they have a very strong economic relationship with Europe, and now with a $750-billion package to restore and recover the economy in Europe, and those are the main three partners, and with the relocation of activities they could benefit.

The same also could apply by strengthening the economic ties between countries like GCC with Lebanon, Jordan, Egypt and others, in order to create this new form of regional integration that could allow both to achieve internal development goals on a country-by-country basis, but also to create a greater space for economic and social prosperity.

This is an important issue because, as you know, this is something that we have been watching, we have introduced an index back in 2017, that monitors the social unrest, and we are still seeing upticks, especially now with the countries reopening, we are seeing upticks of some social movements, and it's very important to have this as a key anchor of any recovery strategy.

MS. AMR: Thank you, Jihad. We have two more questions on the GCC before moving to other issues. Also, from Simeon Kerr: Have GCC economic support measures been sufficient to prevent economic damage especially to the private sector?

MR. AZOUR: Well, Simeon, as you know, GCC countries have introduced three types of packages, one is a fiscal package to support livelihood of people mostly it was in form of cash transfer, reduction in some bills, defer of tax payments. This was the first element of their response. The second element of their response was to support a certain number of economic sectors by extending liquidity and financing support through central banks.

And in certain cases, like in Bahrain it went up to the higher level. The same also in Bahrain the fiscal package was around 6 percent. And the third one is by reducing the level of interest rates, on average it was about 150 basis points, and in certain countries it went lower than that. What, those three packages are telling us, that on average, what the GCC had introduced was I would say in line with other EMs may be less than what we saw in advanced economies.

The second point is some countries have already, very strong social protection systems especially to their citizens, for example, in Saudi with a citizen account and also various programs in other countries, which means that they have some type of economic stabilizers that were activated immediately after the shock.

Of course, when we look at the GCC, we need to look at some of the key sectors that have been pillars of the diversification, and some of those sectors were affected, for example, tourism, real estate, airline transportation logistics, and those would require to maintain for a certain period, the level of measures, but making sure that those measures are well targeted and also they're temporary. And this is the name of the game and what is needed today, in parallel with preparing for a stronger recovery.

What the stronger recovery will look like? It's a recovery where gradually we see in the non-oil sector a moving up into high value-add type of activities where technology will play an important role. We expect to see also some of the sectors that were, I would say, on trial basis, like, for example, greening the recovery in UAE and others to expand. We expect also that this will give an opportunity to streamline some of the public entities and to make them more productive, and allow the private sector to gain an additional space in the economy.

This also can be done by looking at the support to SMEs, which was one of the issues of the past and to see how access to finance can be expanded here in this area. Importantly, is to make sure that over the medium term, that this process of reducing the dependence on oil and oil cycle will be maintained.

MS. AMR: Thank you. The IMF had an estimate that the GCC $2 trillion wealth will dwindle in 2034. Has that estimate changed?

MR. AZOUR: in fact, study that -- this study was to look in the long term and address some of the structural issues that many commodity dependent countries not only in the GCC are facing. The purpose of this study was to show that the need to gradually start transformation of the economic structure, as well as also fiscal management, that in the case of the GCC is happening.

We saw several countries diversifying their source of revenues and also recalibrating some of their expenditures. This is something that we also saw during the COVID-19 shock. Some countries have reallocated some of their expenditure items in order to, on one hand, increase the support to the economy, but also do it by reallocating and reprioritizing among the list of expenditures those who are important. Some also have continued in reforming the subsidy system in order to increase the effectiveness of public spending.

Having said that, the second part of your question, which is the size of the assets and how the assets were affected by this crisis. It's a broader question because some of those assets are invested internationally. And, therefore, only those sovereign wealth funds and those entities in charge of managing these assets can assess a potential impact of what we saw on the markets on the net present value of those assets.

MS. AMR: Thank you. Our next question is on debt from oil importers from. How worried are you about debts of oil importing countries in the MENA region? These countries are forced to accumulate more debts to deal with the economic fallout of COVID-19. Can the current debt level sustain them through the shock, or they would have to borrow more? And what could the implications be of that?

MR. AZOUR: Well, it's an important question. First, we expect this year to have, unfortunately, an increase in level of debt. Especially for oil importing countries, we expect the level of debt on average to reach 95 percent. Which is high and reaching very high levels. Of course, this is something that we are seeing across the globe. Debt is increasing because of the negative growth and the need to provide additional support to livelihood and to the economy.

What does it mean? It means that it's very important for countries to, on one hand, to strengthen their fundamentals. And this is where we see differences. Countries who have strong fundamentals were able to sustain the shock. And the impact of this on some of the key financial indicators was minor. The widening of their spreads, for example. The impact on the cost of borrowing was less affected by the crisis than other countries. Therefore, maintaining the cap on improving on a sustainable way the public finance situation is very important.

And this needs to be done in different ways by making sure that investment and spending are productive. And on that, very soon we will publish study on social spending that will show that both the level of spending and the efficiency of spending needs to be improved. And this has to, for example, in the case of the region, gain more priority. And how to do it? We need to reallocate within the same envelope and reduce or improve spending in other areas.

Revenues can be made also more progressive in order to have the right burden sharing and more efficient in terms of revenue administration. Debt and debt management is also an important element. And this is in terms of measures. But there are also important dimensions, which are the medium-term reforms anchoring fiscal management into medium term fiscal framework. Provide some safeguards to debt and debt development. Address structurally those issues, are steps in the right direction. They don't only help and reduce the level of deficit, but also, they will reduce the overall risk on the economy. And we all know that this risk will translate into a premium debt also the private sector has to pay and the risk of crowding out. Therefore, it's an important pillar, but it's a pillar that has to be done on a country by country basis while preserving and protecting what needs to be done to protect lives and to protect livelihoods.

MS. AMR: Thank you very much. We have a question on Yemen. What is the IMF's role in Yemen and how can the IMF help improve the banking sector there?

MR. AZOUR: Well, as you know, the Fund has been helping Yemen. And Yemen is one of the countries who have benefitted from the grant facility that the Fund has put explicitly to help countries who cannot borrow during the coronavirus shock. And the Fund is in active discussion and dialogue with the authorities. And this is something that we have been doing in order to help strengthen the state institutions and, namely, the Central Bank and the Ministry of Finance.

We are helping those two institutions in order to allow those core functions of the state to keep operating and provide the needed support to the overall government, as well as also to the economy to avoid the problems that we saw in the past. We are helping them with technical assistance. Also we're helping them with policy support. And the team is actively working with them, especially to address the recent issues that have been affecting the exchange rate and the overall economic situation. This is one important work that the Fund is doing.

The other important work that the Fund is doing to help a country like Yemen, and this is something, for example, we're doing for Sudan now, is to help mobilize international assistance. We believe that Yemen needs additional assistance, especially in terms of grants. We also are mobilizing the international community to keep an international presence in terms of medical support, especially to address the coronavirus issues. Also, support to livelihood of people to education to all these important elements that will allow the minimum of social protection to be maintained and to increase the level of resiliency.

MS. AMR: Thank you. A question on Morocco.

The Moroccan government expects growth to lose 5 percent. What are your expectations for the situation in Morocco? What about lifting the lockdown? Thank you.

MR. AZOUR: Well, before talking about the outlook for this year, we know that the Moroccan economy is one of the most dynamic in the area. And it's also linked to the global value chains. But also, Morocco lately adopted a series of reforms that allowed the country to improve its economic situation to bring better macroeconomic stability and to improve productivity and competitivity, which allowed Morocco to play a bigger economic role.

The government also in Morocco adopted rapid measures and important ones. The IMF contributed also, and the private sector was included with all the measures taken by the government to help marginalized categories and poor people. So, Morocco is adapting to the new needs in order to face the corona pandemic. The government and the ministry of finance and the central bank also adopted lots of support measures providing financing to the private sector through credits or improving investments and providing direct support to households in the country. This allowed the country to face the crisis with minimum losses.

Now, of course, there are some weaknesses in Morocco and other countries, which is the informal sector. The informal sector is a genuine problem because in this crisis, it gets to lose a lot. And it is very hard to find the tools to reach people working in the informal sector and to provide them with assistance. So, authorities in Morocco are trying to work on this problem. Then the agriculture sector is very important in the Moroccan economy. It's also impacted by climate change and, of course, crises such as the COVID-19 crisis. And this as well, had an impact on the economy.

But again, the measures adopted by the authorities were very helpful and the IMF supported the government providing a credit line of $3 billion that was not used during the last 10 years but is being used during this crisis. and this improved the reserves of the central bank that used very developed monetary and financial tools to control the exchange rates and to improve the confidence of the private sector and of the public sector.

MS. AMR: Is Algeria facing a risk of default payment? Is the IMF in talks with Algeria about the possible financial support?

MR. AZOUR: Well, Algeria was among the various countries of the region to be affected by the double whammy of the COVID-19 shock, especially with proximity with Europe, and also the shock on the oil price and as one of the largest oil and gas exporters. And this has affected the overall situation in Algeria. But the issue with Algeria, that Algeria entered this COVID-19 pandemic with weak fundamentals because over the last few years, we saw a deterioration in the public finance with increased level of deficit that was monetized to financing from the central bank.

And this compounded with the COVID-19 shock, and the measures that were needed in order to protect lives and also the decline in oil price has weakened further the macroeconomic stability of Algeria. We are, of course, with Algeria in active discussions and dialog. I visited Algeria back in February, a few months ago, and had the opportunity to meet the president, the prime minister, and the economic team.

I think what the economic team is looking forward in terms of reforms need to be activated and strengthened in order to, on one hand, keep providing support to protect population from the outbreak and potential second wave of the COVID-19 pandemic. But also gradually to improve the fundamentals of the economy and allow Algeria to protect its level of foreign reserves. And also to maintain its capacity to reallocate resources internally in order to provide additional social support to its population.

MS. AMR: Thank you. We have two more questions. One question is in Arabic. After lifting the lockdown in many countries, there is a rather quick recovery. Do you believe this will have an impact on the growth in the Gulf countries and the Middle East countries as a whole? What do you expect?

MR. AZOUR: Well, it's an important question. In the Middle East or worldwide, we are facing problems to have accurate expectations because the situation, of course, is unclear. At this point, we do not know if we are to expect a rebound or a second wave of the virus. We do not know how strong the recovery will be when it comes for the Middle East. We do not know what will happen to oil prices. Will they recover strongly or not? And as I said in the beginning of the presser, the countries in the area were able to adopt very important measures to protect their citizens and to contain the spread of the virus and to provide social safety nets. So, this is an important point.

Of course, there are differences between countries when it comes to the public health sectors and capabilities. But what we should concentrate on now are three points. First, we need to continue protecting the health of the citizens and to provide a social protection. This means to increase readiness investment in the health sector and in social and health infrastructures. This applies mostly to the poorest countries in the area.

Second, we need to concentrate on the economic recovery in two parts. First, we need financial stability. So, we need to be very cautious in managing public spending and then we have to push the recovery forward by using our strengths. For instance, technology, because we have a young society, an educated one, that can use technology in a very efficient way. And this can be very helpful in bringing jobs and stability.

A protective society needs also better investment in the economic infrastructure and the government plays here the role of the party presenting incentives. And the private sector plays a most important role in encouraging productivity. Women need to play a very important role at this level, especially with their education and this is a very important point that would support growth.

And finally, what is very important as well, we need to improve the economic productivity by increasing cooperation. We do know that we have lots of capitals coming from remittances from workers in Gulf countries. For many Arab countries, we have SMEs with a huge potential to improve the economic recovery. So, we are in transition phase, a very difficult one. The main point I want to concentrate on is that we need to move forward as quickly as possible in decision making. We need to act ahead of time and not wait. We have to be creative in adopting policies because this is one of the worst crises the area has seen in the last 100 years.

MS. AMR: How many Arab countries asked for financial support? Will the IMF consider additional financial support for Arab countries?

MR. AZOUR: Well, the region has benefitted by more than $17 billion, which is one of the highest increases in providing fund facilities by the IMF in one year. Most of those funds went to Arab countries like Egypt, $8 billion, Morocco, $3 billion, Tunisia, 750, Jordan, 400 RFI plus $1.2 billion for an IFF. Mauritania, Djibouti, also I mentioned, Yemen. Somalia, with whom we had a very positive development this year was an important debt reprofiling that helped Somalia get additional assistance and debt forgiveness and allow Somalia to strengthen their recovery. Currently, we're working in supporting Sudan too.

Our work in the region has been scaled up. And not only financially. And I think this is an important element to mention. We have provided a lot of policy support. We have been actively engaging with our counterparts, the regional institutions, the Arab Monetary Fund, Arab Fund for Economic and Social Development, Islamic Development Bank, and other institutions to, in fact, provide joint support to the region.

We have provided proactive technical assistance and policy advice to many of the governments of the region. And with the Saudi G20 presidency, the Fund has been actively working with the Saudi presidency to develop an important global facility that hopefully will help as many developing countries, some countries from the region to benefit from debt reprofiling and reduce the burden of debt servicing for this year and next year. Those are among some of the activities that we have in the region. We are committed to help.

And to answer the second part of the questions, we are also actively discussing with some other countries, Thanos mentioned Lebanon. A country that is dear to my heart, but as a Lebanese national, I cannot speak in detail about it. But Thomas mentioned that we are in active discussion with the authorities. We are also in discussions with others like Iraq, with whom we have had several exchanges. Tunisia authorities are signaling that they would like to have access to a Fund facility. And so on and so forth.

I think what is important is we believe that our role currently is to help the global economy and the region to address one of the most challenging crises. A crisis like no other. And we will put all our efforts behind that. But when we do this, also we need to make sure that we are helping countries to be sustainable. And sometimes, it's very important also to keep an eye on how the fundamental issues in macroeconomic management are run. The debt and the debt sustainability is an important aspect. The good allocation of resources in order to allocate them where priorities are and to favor now social protection. Make sure that economies are active and productive and allow those economies to create the level of growth that is needed for their youth to find the jobs that they deserve and for this economy to benefit from huge potential that it has, which is its human capital.

MS. AMR: Thank you very much, Jihad. With this we will conclude the press briefing on the Middle East and Central Asia Regional Economic Outlook. Thank you, Thanos, and thank you all for joining us. The recorded video of the press briefing can be found on the IMF website later today. Thank you.