Private investment needs to be boosted in MENAP region: IMF
A recent report released by the International Monetary Fund (IMF) encourages private investment in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP).
The report “How Can Policymakers Boost Private Investment in the Middle East, North Africa, Afghanistan, and Pakistan?”states, “With millions of young people entering the workforce each year, fiscal resources severely constrained, and economic risks on the rise, countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region are at a defining moment. Bolstering the private sector is critical to meeting this challenge, but the key to doing so — increasing private investment in the region—has long been elusive.”
Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, said “Facing increasing global headwinds, MENAP countries need to urgently unlock private investment. That will take more and higher-quality investment in education and infrastructure, and policy reforms to increase access to finance and improve the effectiveness and governance of the public sector.”
Investments in the private sector have been relatively low in the MENAP region as compared to the other emerging markets and developing economies. Since the 2011 Arab uprising, the ratio of investment-to-GDP has gone down in most of the countries of that region. The decline has had an impactful effect on the economy of MENAP region, with an annual loss on growth of oil exporters and importers by 1.5% and close to 1% respectively.
IMF stresses on the need of implementing stronger reforms in the region in order to achieve inclusive growth today and in future. “Policymakers need to focus on reforms that help their countries catch up with their peers on education, infrastructure, financial development, and governance,” IMF said.
According to the IMF, oil importing countries in the MENAP region have a school enrollment rate of just a little above 50% for secondary schools, which is more than 25% lower than the emerging and developing economies average. The GDP could be boosted by more than 1% if the MENAP’s oil importing countries raise school enrollment.
Talking about the infrastructure, it is crucial to ensure universal access to electricity. This would further raise the investment by close to 1%.
“Oil-importing countries also trail their peers on various governance measures, ranging from corruption to the rule of law. Improving the rule of law to the emerging markets and developing economies average could raise private investment by 2/3 of a percentage point of GDP,” IMF said. This would mean, if the level of financial development in MENAP oil importing countries matches that of emerging European countries, private investment could grow by 0.5% of GDP.
The MENAP region is in dire need of implementing policy action to boost private investment.
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