ESCWA Reports Historic Surge in Debt Servicing for Middle-Income Arab Nations.

Amman: Debt servicing in middle-income Arab countries has reached an unprecedented $40 billion, according to the United Nations Economic and Social Commission for Western Asia (ESCWA). Released during the "Regional workshop on developing debt optimization strategies to enhance fiscal space and finance the SDGs" in Amman, the "Debt and Fiscal Outlook Report for the Arab Region" reveals that external debt servicing has consumed more than 15% of revenues in 2023, a significant increase from about 7% in 2010. According to National News Agency - Lebanon, the report provides a comprehensive examination of various financial flows, including debt, domestic resources, and emerging innovative instruments, marking a first for the Arab region. The real value of regional GDP increased by approximately $791 billion from 2010 to 2023. However, outstanding public debt in real terms surged by $880 billion. Despite economic growth remaining largely under 3%, borrowing costs persisted above 5% for both domestic and foreign cur rency debts in middle-income countries. ESCWA Executive Secretary Rola Dashti highlighted the importance of fiscal management in shaping fiscal balances and public debt trends. She noted that in 2023, Arab middle-income countries could have saved over $1.8 billion in interest payments on market debt if they had applied the average interest rate for emerging market economies globally. The report aims to equip policymakers with strategies to enhance fiscal and economic resilience, promoting more inclusive development. It also contributes to global discussions on sustainable finance and the institutional capacities and policy frameworks essential for long-term development. In 2023, total public revenues in the region averaged 32% of GDP, compared to 26.5% for emerging market economies and 35.5% for advanced economies. Dashti suggested that if Arab middle-income countries increased the share of personal and corporate income taxes to 6% of GDP, aligning with the global average for middle-income countries, they could generate an additional $14 billion, distributing tax burdens more equitably. The report proposes an actionable agenda to enhance fiscal space through three main strategies: optimizing debt portfolios, improving the efficiency of public revenues and expenditure frameworks, and increasing the use of innovative and sustainable financing mechanisms.