Banks in the Middle East and Central Asia are limited in their exposure to last month’s banking turmoil in the United States and Europe, but financial pressures are adding to the strains caused by high-interest rates, volatile oil prices, and years of double-digit inflation, according to the IMF top official, reported Reuters. 

According to Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia department, the banking sector’s difficulties come on top of stricter monetary policies that raised rates and curtailed access to funding.

Azour told Reuters, “There was a growing gap between countries with solid credit and access to markets, such as Morocco, Jordan, and oil exporters, and those that were struggling.”

“We are concerned because the risk matrix continues to grow, with high-interest rates, volatility in oil prices, geopolitical tensions, and double-digit inflation for the third year in a row,” he added.

The fundamental issue, he argued, was not banking sector stability, but rather excessive debt levels, the potential of social upheaval, and the capacity to sustain tight policies due to social pressures.

“We see vulnerabilities increasing again,” The IMF Official continued, “which is why countries are encouraged to do more structural reforms, to increase their growth by at least one or two percent.” 

The IMF forecasted on Thursday that GDP growth in the Middle East and North Africa region will drop to 3.1% in 2023, down from 5.3% in 2018.