Combined Arab debt to global banks rises by 18%

Gulf oil producers owed around $222 billion (Dh815.41bn) to world banks just after the eruption of the global financial crisis to become the most exposed group in the Arab region to the international banking system, according to an official report.

The debt accounts for more than 70 per cent of the total exposure of around $309 billion owed by the Arab League's 21 nations to global banks, showed the report, prepared by a group of financial experts at the Abu Dhabi-based Arab Monetary Fund (AMF), a key Arab League body.

Between January and September 2008, when the crisis erupted, the combined Arab debt to global banks surged by around 18 per cent to $309bn, accounting for about 18 per cent of the 2008 Arab GDP, it said.

The report gave no figures for 2009 but international banks have generally stopped providing credit to the region because of a severe liquidity shortage and heightened risks in many economies following the crisis.

It showed the UAE, one of the most open economies in the region, emerged as the most indebted Arab country, owing around $121.9bn, representing as high as 57.7 per cent of its GDP, the report said.

"Arab liabilities to the global banking system have rapidly and steadily grown over the past years because of high economic growth. But following the eruption of the crisis, most world banks sharply reduced their lending activities," it said.

A breakdown showed Saudi Arabia was the second largest indebted Arab nation, with debt owed to foreign banks standing at $38.3bn at the end of September 2008. Qatar came third with around $32.1bn followed by Egypt, Morocco, Tunisia and Libya.

The report showed around 60 per cent of the GCC's debt is owed by the non-banking private sector while the GCC's liabilities to the local banking sector accounted for nearly 31 per cent of their total foreign liabilities.

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