The way public debt affects economic growth in the Arab region is heterogeneous and depends on the country's income level group.
For middle- and high-income Arab countries, public debt helps improve long-term growth with a very limited impact in the short term.
There is no evidence that public debt improves economic growth in low-income Arab countries in the short or long term.
For all groups, the Arab countries' public debt is inefficient regarding investment.
Arab countries are encouraged to strengthen their public debt management and provide a clear roadmap for public and private sectors to coordinate and set partnerships.
The Arab Monetary Fund (AMF) has published an economic study titled "Public debt and economic growth in Arab countries: structural or short-term benefits?”. This research covers twenty-one Arab countries between 1990 and 2021. It investigates if the public debt improves production capacities and long-term growth in the Arab region or if its effects are limited in the short run.
Key findings reveal that public debt helps improve long-term growth with a very limited impact on the short term. This conclusion is valid mainly for middle—and high-income Arab countries. At the same time, there is no evidence that public debt helps low-income Arab countries improve their economic growth in the short or long term. A common finding for all groups is the lack of efficiency of the Arab countries' public debt in terms of investment, with a much smaller total investment improvement compared to the debt increase.
Considering these findings, the study recommends strengthening the public debt management frameworks in Arab countries. This would help Policymakers steer debt toward investments in sectors that promote long-term growth and productivity and provide a clear roadmap for the public and private sectors to coordinate and set partnerships.
The full study is available for stakeholders and the public, providing valuable insights into the implications of public debt on economic growth in the Arab region.
For More Information:
Visit the AMF website or contact the Economic Department at the Arab Monetary Fund for additional details and access to the study.