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Sat 17 Dec 2011 09:56 AM

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MENA only region to see net capital flows drop in 2010

World Bank reports fall to $26bn as global flows to developing countries rise 68%

MENA only region to see net capital flows drop in 2010
The Middle East and North Africa was the only region of developing economies to record a fall in net capital flows in 2010

The Middle East and North Africa was the only region of developing economies to record a fall in net capital flows in 2010, the World Bank has said in a new report. 

They fell 10 percent to $26bn, with lower net equity and debt-related inflows from official creditors only partially offset by increased bond issuances. 

The ratio of external debt stock to exports was 43 percent. By the end of 2010, international reserves in MENA were high in relation to external debt stock, at 227 percent.

Globally, net capital flows to developing countries rose by 68 percent in 2010 to $1,130bn, compared with flows of $675bn in 2009.

Last year’s increase was driven by a massive jump in short-term debt, a strong rebound in bonds and a moderate rise in equity flows, according to the Global Development Finance 2012: External Debt of Developing Countries report.

The combined stock of developing countries’ external debt increased by $437bn to $4trn at end 2010, equivalent on average to 69 percent of exports. 

Short term debt constituted 25 percent of debt stock, but risks were mitigated by international reserves, equivalent to 137 percent of external debt stock at end 2010.

The report said debt related inflows jumped almost three-fold, compared to a 25 percent increase in net equity flows, driven by a massive jump in short-term debt and a strong rebound in bond issuances.

East Asia and Pacific had the fastest rise in net capital flows in 2010, increasing by 90 percent to $447bn, which was dominated by China where net equity rose 52 percent and net debt flow rose 178 percent in 2010. External debt stocks rose 21 percent in 2010 but the ratio of external debt stock to exports - 37 percent at end 2010 - was the lowest of all regions.   

Europe and Central Asia region recorded a 66 percent increase in net capital inflows in 2010 to $173bn, driven by the rise in net debt inflows from private creditors. 

Latin America and the Caribbean saw net capital inflows rise to $319bn in 2010, well above their pre-crisis level while South Asia region saw net capital inflows rise by 29 percent in 2010.

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