The Arab Monetary recommends attracting direct investments that preserve assets

Alanbat - Sbaa Alsukar

Translated by Mahmoud Alayyat

The study issued by the Arab Monetary Fund recommended the governments of Arab countries; Focus more on attracting direct investments and portfolio in assets, so that they do not involve bearing debt burdens, which does not have negative consequences and potential risks on financial stability in the countries of Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Palestine, Saudi Arabia, Sudan and Tunisia. 

These recommendations came as a result of the study conducted by the Arab Monetary Fund on "The Implications of Capital Flows on Financial Stability in the Arab Countries”, which led to the conclusion that net capital flows may have a negative impact on financial stability in the Arab countries in the long term, by increasing credit growth, while the types of capital flows differ in contrast with the implications for financial stability, especially that the study worked on an additional analysis to study the impact of types of capital flows on credit to the private sector in the Arab countries. 

The study concluded that "direct and portfolio investments” have a significant impact on credit to the private sector in the long term, which does not have concerns about the accumulation of risks on the sector and financial stability, while other investments show long-term positive effects on credit provided to the private sector in countries, this indicates that it may have a long-term negative impact on financial stability

Study, which indicates that it may have a long-term negative impact on financial stability.  In the same context, the study focused on knowing the impact of net capital flows on credit to the private sector as a share of GDP, in an attempt to know and assess the maximum extent that net capital flows can lead to excessive credit growth, and thus undermine financial stability. 

The study aimed to shed light on the impact of capital flows, whether in the form of direct investment, portfolio investment, or other investments, on the stability of the financial sector in the Arab countries.