Tighter global monetary conditions and spillovers from the war in Ukraine have caused public debt problems to worsen in several emerging markets, and the MENA region is not immune to this. Within the region, Tunisia’s public debt position is most fragile and the government now faces a ballooning subsidy bill. We think that a debt restructuring will ultimately needed. Elsewhere, the devaluation of the Egyptian pound has coincided with concerns about the growing share of public debt that is denominated in FX. Of course, in the Gulf, high energy prices will provide a significant boost to public finances this year. We’re more concerned about private sector debts, particularly in Dubai. With the Dubai World Expo now over, there’s a growing risk of overcapacity in key sectors that could make debt servicing more difficult.
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