00:00How would you characterize the impact the war has had on the various economies in the region?
00:07Because just looking at your forecast, it's pretty apparent that each economy that you track seems to have been impacted
00:14differently.
00:15Thank you, Jamana. Of course, this war delivered a severe shock to the region.
00:19It was sudden, disruptive, and the reverberation of this shock are expanding beyond the remit of the region.
00:29Of course, there are the countries who are at the epicenter, countries in the Gulf where oil and gas were
00:35hit.
00:36We're now more than 50 days after the disruption and the closure of the War of Hormuz.
00:42This had an impact on countries who depend on that.
00:47Of course, countries are not in similar positions.
00:49There are countries who are highly dependent like Iraq, Kuwait, and Iran, the most affected.
00:55There are other countries who can have access outside like Saudi or Oman are less affected.
01:02But this shock is not only in oil and gas.
01:06It also affects industrial products, trade, tourism, international logistics, and affects countries beyond those who are directly hit by the
01:16conflict.
01:16For the oil importing countries, the impact is mainly by the increase of price of oil, remittances, and also impact
01:26from the financial markets.
01:27For the MENA region as a whole, you've slashed your growth forecast from 3.5% in 2025 to 1
01:35% this year.
01:36Now, I've got to ask you, what is the sensitivity of this forecast to the time length of the war
01:45and the fact that even today, yes, there is a ceasefire in place, but the strait is still effectively closed.
01:52Could we be in a situation where these forecasts get revised downward even further?
01:58Could we even be in a situation where you could forecast a recession for the region as a whole?
02:03Well, those projections are based on a reference scenario that implies that the war will end by mid-year and
02:09the recovery will be fast.
02:10What will change our projections is A, the duration of the conflict, and to the extent this will keep the
02:20strait of hormones closed,
02:23the depth of the disruption, and how fast the recovery will be.
02:28What this economic shock showed us, that it's not only about oil and gas, it's about several other activities and
02:37products.
02:37The scarring effect of this war will also determine how fast countries can recover.
02:43Therefore, we are in a highly uncertain moment at this stage, and I think it's very important to take this
02:52high level of uncertainty into consideration
02:54when one would look at the projections for this year and next.
02:58A country-specific question.
02:59There's a school of thought out there that assumes that the Kingdom of Saudi Arabia is actually to a certain
03:05degree benefiting from the higher oil prices
03:08and that what they've lost in volume, they've made up in oil prices.
03:13Where does the IMF see the situation for the Kingdom of Saudi Arabia and their overall public finances?
03:20Well, Saudi was able to redirect and use the infrastructure in order to keep a certain portion of their oil
03:31and gas exports functioning.
03:35And they provided infrastructure and logistics support to several countries in the region.
03:44Of course, again, they were hit relatively to a less extent than other countries.
03:52Our revisions for the outlook for this year are a downgrade of 0.5%, where in other cases, like in
04:00the case of Qatar, is much larger than that.
04:02Of course, again, here, the capacity to benefit from the increase in oil price would depend on how much you
04:11can export and produce.
04:13But what one could say that the playbook that the Saudi authorities deployed at the beginning of the crisis by
04:21preserving their capacity to operate their economy,
04:26repairing very quickly the damages that were inflicted, using their infrastructure on the Red Sea,
04:32and make also others benefit from it was something that allowed them to be more resilient,
04:38but also provided support to other countries in the region.
04:41There's been a lot of talk the last couple of days, and even President Trump referenced this himself in an
04:46interview that he conducted yesterday,
04:48about Gulf nations and specifically the United Arab Emirates,
04:53speaking to the U.S. about the possibility of opening up a precautionary swap line.
05:00What is the IMF's assessment right now of the UAE's current liquidity and solvency situation?
05:08Well, we are not informed of those bilateral discussions,
05:11but the situation of the UAE on the financial strength is a situation of a country that has high level
05:18of reserves, liquid,
05:20and the level of debt to GDP is relatively low.
05:24And recently, rating agencies have ascertained the rating of the country of UAE.
05:29Therefore, of course, like other countries in the region, they are affected,
05:33but they have the capacity to support the shock.
05:37They have also, in the case of the UAE, put in place a certain number of measures
05:41to protect the stability of the financial system, inject liquidity,
05:45and allow the banks to operate close to normal.
05:50Those measures that were used, some of them similar to what has been used during COVID,
05:55allowed the economy to withstand the shock and to buffer the negative impact of the war.
06:02And when we talk about some of the smaller economies of the region
06:07that are also not immune to the effects of the war,
06:12many of them are already in an IMF program.
06:15Is there, well, is the expectation that the current policy frameworks are going to be sufficient
06:23to support these economies, or will some of these programs have to be modified and expanded?
06:30Well, those countries talking about Egypt, Pakistan, Jordan, or Morocco
06:35responded to the first wave of the shock by deploying their policy tools.
06:39In the case of Egypt, the exchange rate regime had them reduce the reverberation of the shock
06:47coming from the war.
06:50That allowed them to use the flexibility of the exchange rate to protect their economy,
06:55also the fiscal measures they took, reduced the pressure on fiscal.
07:00Same thing for Jordan, where the economy also benefited from the level of resilience
07:07that was built in the system throughout the program.
07:09Of course, in both cases, Pakistan, Egypt, and Jordan,
07:14the various review have released a few billions of dollars for each country,
07:17which allowed them to have also additional liquidity.
07:20And for the case of Morocco, their line that can be used at any moment
07:25provide them with liquidity.
07:27Of course, policies need to be calibrated based on the shock.
07:32And if the shock sustains for longer, they need to deploy further policies.
07:37And in that case, the fund stands ready, on one hand, to make the programs more calibrated
07:44to the needs of those countries.
07:45And if there is a need for additional financial support from the fund,
07:49the fund, as the managing director said during the spring meetings,
07:53has already preparing itself to provide support to countries in need.
07:57One of the sharpest downgrades that came through alongside Iran and Qatar is to Iraq.
08:04And in a similar fashion, Bahrain is one of the countries that stands out
08:09from a fiscal standpoint, very high debt-to-GDP level, very high deficit.
08:15With respect to those two countries, how close would you say are we to the tipping point of a fiscal
08:22crisis?
08:23Those are two different cases.
08:25Iraq is a country that has high dependence on the revenues from oil,
08:29high dependence on the Strait of Hormuz with very limited fiscal reserves, fiscal buffers.
08:34And the erosion of their fiscal situation was there before the shock itself.
08:41The shock has increased the tension or the pressure on their public finance.
08:46Iraq needs to use its current fiscal situation in order to address the shock.
08:55They have to reduce their spending to the minimum level, social protection, salary, and wages.
09:04And they have to start working on building their fiscal muscles by diversifying their revenues.
09:10Of course, Iraq has reserves, but the fiscal situation requires attention.
09:17And this issue has emerged even prior to the war.
09:20In the case of Bahrain, yes, Bahrain has the highest level of debt among the GCC countries.
09:27But the economy of Bahrain is diversified.
09:30And also, Bahrain benefits from the strong support that GCC provides.
09:37We saw that the UAE Central Bank has extended a swap line to Bahrain Central Bank
09:43in the beginning of the war of an equivalent of $4 to $5 billion,
09:48which provides them with additional liquidity.
09:51But also, we saw Bahrain on the financial side through the Central Bank
09:55putting in place a certain number of measures in order to protect the functioning of the system,
10:01provide liquidity, and allow the banks to operate under the current conditions.
10:06Yeah.
10:07And I've also got to ask you about Lebanon as well,
10:09which is directly involved in a war.
10:12And prior to the war kicking off, prior to the conflict,
10:17there had been preliminary discussions taking place between Lebanon and IMF
10:21about the possibility of a program.
10:23We have spoken about some of the bank restructuring measures
10:28that the Lebanese cabinet had passed in recent months.
10:32Could you just give us a mark-to-market on where things are right now with Lebanon
10:38and how much of a setback this war is going to constitute
10:41vis-Ã -vis the ability of Lebanon to get into an IMF program?
10:47Well, Jumana, this war has inflicted a huge humanitarian toll on Lebanon,
10:53destruction of infrastructures, more than 2,000 fatalities,
10:58and the war is still ongoing.
11:00Of course, this comes over and above the various shocks that Lebanon went through
11:07over the last couple of years,
11:09and the recovery that we saw in 2025 after two years of negative growth
11:16has now been eroded by the recent developments.
11:20Negotiations between the fund and the Lebanese authorities did not stop,
11:26and they continued during the spring meetings, around three pillars.
11:30One is how to address the immediate impact of the war,
11:33where Lebanon needs to get more support internationally in forms of grants
11:39in order to alleviate the humanitarian pressure
11:42and to accelerate the reconstruction.
11:44Second is how to address the financial issue.
11:47And here, principles are still the same.
11:50You need to protect the small depositors,
11:53respect the international rules of hierarchy of claim,
11:56and accelerate the restructuring of the financial system.
11:59Three is medium-term fiscal stability,
12:01whereby not only you address the debt issue,
12:04but also you have enough control over the fiscal situation.
12:09Negotiations are progressing,
12:11and they come in parallel also to the possibility of Lebanon reaching a ceasefire.
12:18And with that, I think it will be an opportunity for both the authorities
12:23and the team focused on Lebanon to accelerate the discussions.
12:26and do not continue to record your day.
12:26Okay, let's move on.
12:26So, let's do the testing and do the testing.
12:26Let's see.
12:27Give it that.
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