Updated on
Summary Countries include Pakistan, Afghanistan, Egypt, Jordan, Lebanon, Morocco, Pakistan, Syria.
According to Masood Ahmed, the regions oil-importing countries had a difficult time in 2011.Unparalleled domestic pressures and a challenging external environment - notably, the slowdown in global growth and higher oil prices-weighed on economic performance. Growth faltered, unemployment-already chronically high across the region - continued to rise, and government budgets stretched further.Although remittances and exports helped hold up income in many countries, foreign investment and tourism declined sharply. In addition, adverse movements in fundamentals and investor sentiment contributed to a decline in stock market indices, wider sovereign spreads, credit rating downgrades, and capital outflows from some countries.As a result, growth for the regions oil importers, excluding Syria, fell by nearly half from 4.3 percent in 2010 to 2.2 percent in 2011.Masood Ahmed reveals that the months ahead will be equally challenging for the oil importing countries including Pakistan because many countries now have smaller policy buffers than they did in 2011.Last years policy response increased spending, which pushed up fiscal deficits and diminished external inflows. Accompanied by large current account deficits, the policies led to reserve losses.And as political transitions play out, private investors will likely remain in wait-and-see mode; it will take some time for investment, tourists, and capital to return.For the regions oil-importing countries, maintaining macroeconomic stability in the current environment will be challenging.Corrective measures are needed to lessen vulnerabilities, and some steps can be taken quickly. Governments must control spending on untargeted subsidies, which predominantly benefit the wealthy, and begin putting in place more effective social safety nets to protect the poor.Central banks need to maintain external stability, which may require greater exchange rate flexibility. Ensuring adequate financing is also a key priority. The oil importers external financing needs are an estimated 50 billion dollars in 2012.Given that capital markets will not meet all of that demand it will be important to scale up the international response, the report concludes.
