DUBAI (Reuters) – Governments in the Middle East and Central Asia need to increase spending in areas such as social protection, education and public health, where vulnerabilities have been exposed by the coronavirus pandemic, the International Monetary Fund said.
The region, spanning around 30 countries from Mauritania to Kazakhstan, still lags global peers in terms of social spending and “socioeconomic outcomes,” the Washington-based multilateral lender said in a study published on Tuesday.
“The pandemic has further magnified these challenges and brought into sharp focus the urgent need for higher social spending, particularly on health and social protection, to save lives and protect the most vulnerable,” it said.
The IMF has estimated that real gross domestic product across the region will shrink by 4.7% this year as the pandemic hits sectors such as tourism and trade. Low oil prices and crude production cuts are meanwhile straining the finances of regional oil exporters and reducing remittances.
For many countries, the health crisis has exposed long-standing vulnerabilities in health infrastructure and social safety nets, but their ability to address those problems is now facing financial limitations.
“Public finances have been significantly stretched to deal with existing needs as well as the human cost of the pandemic and to contain its economic fallout,” said the IMF. “In many countries, financing constraints limit the availability of budgetary resources.”
Social spending in the region is generally lower than in other parts of the world, with governments spending about 10.4% of GDP on average, compared to a 14.2% average in emerging markets. Countries in the oil-rich Gulf spend less than advanced economies, said the Fund.
Social protection spending averaged 4.9% of GDP in the region, against 6.6% in emerging markets.
While most countries have increased social spending in response to the pandemic, this may not be sustainable without creating new revenues or using resources more efficiently.
“Even without increasing outlays, boosting the efficiency of spending would help significantly improve socioeconomic outcomes,” the IMF said.
“For example, life expectancy at birth could increase by three years in Kuwait if the existing resource envelope was spent at the efficiency level of advanced economies.”
(Reporting by Davide Barbuscia; Editing by Catherine Evans)