Gulf financing challenge to IMF's MENA role
Gulf capital is reshaping the financial order of the Middle East and North Africa — increasingly displacing the IMF through a combination of bilateral funding, state-backed investment and political influence. By Jason Mitchell.
Saudi Arabia and the UAE are offering large bilateral packages within the Middle East and North African sphere that in some cases now match or exceed the scale of IMF programmes. These funds are not tied to policy reforms or phased reviews. Instead, they offer quick access to liquidity without the political cost of cutting subsidies, raising taxes or adjusting exchange rates.
For many governments, that makes them more attractive than IMF loans. But for investors and creditors, it raises concerns about transparency, debt sustainability and the ability to assess sovereign risk.
Only three countries in the region — Morocco, Jordan and Egypt — currently have fully active IMF programmes, although Gulf capital has also played a prominent role in each. In Egypt, for example, Gulf investment has supported liquidity and bond market stability while overlapping with IMF support.
Morocco has maintained access to IMF credit since 2023 without drawing on the funds, while Jordan is implementing a four-year programme agreed in early 2024 and has secured additional IMF support for long-term resilience. By contrast, Tunisia has blocked IMF engagement entirely and Lebanon remains stalled in negotiations.
Instead of IMF loans, many governments are turning to Gulf bilateral funding — including central bank deposits, direct budget support and largescale investments from Saudi and Emirati institutions. These arrangements bypass the IMF framework entirely: there are no phased disbursements, no performance reviews and little public disclosure.
"The GCC, particularly the UAE, Saudi Arabia, Kuwait and Qatar, have dominated the financial landscape in the MENA region," said Carla Slim, senior economist for MENA at Standard Chartered. "In recent instances, such as Egypt's IMF programme, GCC financial support to ensure a fully funded programme was a rigid IMF conditionality to move forward with the programme.
"As such, we would not argue the GCC is bypassing the IMF but acting as a complement to IMF funding and often requiring fiscal reforms resembling those of the IMF, such as the Bahrain 2018 fiscal balance programme. Reform incentives remain aligned with IMF blueprints, as the GCC is as keen on fiscal sustainability."
This shift is gradually happening, with Gulf states increasingly positioning themselves as alternative lenders of last resort.
James Swanston, MENA economist at Capital Economics, said: "I think it's certainly been a trend over the past three years or so where the Gulf has stepped into this realm, particularly led by Saudi Arabia, the UAE and, to some extent, Qatar. Economically, I think part of the reason is that those three economies have a vast amount of capital that they could use. Realistically, they were looking at ways of recycling that, and part of that was in these sorts of ventures into the rest of the region."
Alia Moubayed, managing director for fixed income strategy at Jefferies, the investment bank, offers a similar perspective. "The contribution of Gulf states, notably Saudi Arabia and the UAE, has reshaped the financial landscape significantly, as their funding so far has outweighed by far the amount of bilateral and multilateral funding provided under traditional IMF programmes.
"Having said that, while some UAE capital has bypassed the traditional IMF conditionality model, it has also reshaped the IMF's framework and often provided incentives for other bilateral donors to increase their envelope in support of the country."
Egypt’s experience shows how Gulf support is reshaping the role of the IMF in practice. The country is under an active US$8bn IMF arrangement launched in March 2024, but reform implementation has lagged. While the fourth review released US$1.2bn in March 2025, further disbursements are now delayed as the IMF moves to combine the fifth and sixth reviews to give Egypt more time to meet structural reform targets.
By contrast, the UAE’s US$35bn Ras El-Hekma investment package — announced in early 2024 and led by Abu Dhabi’s sovereign wealth fund ADQ — included US$24bn in fresh foreign exchange and the conversion of US$11bn in existing central bank deposits into equity stakes.
The deal triggered a rally in Egyptian sovereign bonds and helped unlock the IMF programme expansion, although additional funding has yet to materialise. In August 2025, Egypt also announced plans to activate a US$7.5bn partnership with Qatar, reinforcing the role of Gulf states as first responders in sovereign liquidity crises. Saudi Arabia, meanwhile, extended US$5bn in deposits to Egypt’s central bank in 2022 and has continued to ramp up investment pledges across the region.
However, while these flows have provided immediate liquidity and market relief, they have also reduced pressure for reform.
Varied engagement
Beyond Egypt, engagement with the IMF has varied widely. Tunisia has avoided IMF support entirely, with President Kais Saied repeatedly rejecting IMF terms — from subsidy cuts to tax hikes and public sector reforms — arguing austerity would fuel unrest in a country already struggling with high unemployment and rising living costs. Since consolidating power in 2021, he has framed IMF conditionality as foreign interference and blamed Tunisia’s economic woes on past corruption rather than current policy choices.
"Tunisia has rejected an IMF deal. President Saied is very staunchly anti-IMF," said Swanson. "I think Tunisia will probably, for the time being, always favour Gulf support because of how Saied views the IMF. But, at the same time, it's quite notable that it even seems now that the Gulf states are sort of oblivious to the fact that Tunisia needs to go through economic reform as well."
Saudi Arabia provided a US$500m package in July 2023 — a US$400m soft loan and a US$100m grant — to support Tunisia's budget and reserves. Beyond this, no significant Gulf funding has materialised.
Meanwhile, Lebanon remains largely sidelined amid deep economic and political paralysis, with no meaningful Gulf funding or IMF engagement. Despite some legislative reforms — including amendments to banking secrecy and a restructuring framework — the lack of political consensus continues to hinder financial support.
The IMF acknowledged limited progress in a June 2025 assessment but stressed that significant reforms are still required and that external financing remains essential. Meanwhile, Gulf engagement has been largely symbolic. No new bilateral loans have materialised, and although Gulf states have signalled a willingness to assist Lebanon's recovery, this support remains conditional on credible reform commitments.
However, Morocco remains one of the few MENA countries with active IMF support. In April 2023, it secured a US$5bn flexible credit line, which remains undrawn and serves as a precautionary buffer. The facility reflects Morocco’s relatively strong macroeconomic framework and credibility with external creditors. Unlike neighbours that have rejected IMF terms or turned to Gulf financing, Morocco has maintained multilateral access without politically sensitive conditionality.
The IMF’s 2024 Article IV review praised Morocco’s fiscal discipline and institutional resilience, while noting that rebuilding buffers after successive shocks — including the 2023 earthquake — remains a key priority. Morocco has not sought direct financial support from Gulf states in recent years, setting it apart from the region’s broader shift towards bilateral Gulf funding.
Jordan also remains fully engaged with the IMF. A four-year extended fund facility approved in January 2024, worth around US$1.3bn, has delivered US$595m after three reviews. In June 2025, the IMF also approved a 30-month resilience and sustainability facility granting US$700m to support reforms in water, energy and climate resilience, reinforcing Jordan’s fiscal stability and long-term reform agenda.
Gulf capital is reentering Syria, once isolated by war and sanctions. In July 2025, Saudi Arabia signed around US$6.4bn in investment agreements with the country across telecoms, real estate, cement, education and agriculture. Around the same time, Qatari and UAE firms signed deals worth an estimated US$14bn, including plans for a new airport and a subway system in Damascus. Saudi Arabia and Qatar also settled Syria’s arrears to the World Bank, paving the way for renewed multilateral engagement and eligibility for new funding.
While Syria lacks a formal IMF programme, the fund reengaged in 2025 by appointing its first mission chief to the country since 2009.
"This emerging Gulf-led model is already shaping the political economy of reform across the region and redrawing geoeconomic power balances within the region, with Gulf capital also strengthening geopolitical alignment across the MENA region," Moubayed said. "Gulf-led financial diplomacy has significantly anchored sovereign credit risk in Egypt, Bahrain, Jordan and, to a lesser extent, Pakistan, as markets increasingly account for the Gulf capital credit enhancement impact."
Moreover, Gulf financial support across MENA is far from uniform. Instead of a blanket approach, Saudi Arabia and the UAE tailor their interventions based on political alignment, regime stability and the credibility of reform plans. States with clear governments and defined economic agendas have drawn the largest packages, while those mired in political paralysis or rejecting reform terms have seen far less engagement.
"In Egypt, it's very clear — they're backing the regime," Swanson said. "That's not the case in Tunisia or Lebanon. It's a lot more cautious there, partly because there isn't the same political alignment, and partly because there's no real economic reform agenda for them to support. The Gulf is looking for stability and influence, but they're not going to throw money at governments that can't deliver either."
Moreover, the financial reach of Gulf states now extends well beyond the MENA region, with the UAE and Saudi Arabia emerging as active players in sub-Saharan Africa’s economic and geopolitical landscape. Their engagement spans concessional lending, sovereign deposits, infrastructure investment and strategic bilateral partnerships.
In East Africa, the UAE agreed to a US$1.5bn sovereign loan to Kenya in 2024, helping Nairobi reduce its reliance on IMF-linked programmes. Saudi Arabia’s development fund has signed soft loan agreements with more than a dozen African countries — including Malawi, Rwanda, Niger and Mozambique — totalling over US$500m by the end of the 2023 Saudi–Africa Summit.
Gulf capital is also being deployed through logistics and infrastructure corridors. DP World is building a US$1.2bn deepwater port in Senegal, managing port operations in Tanzania and expanding inland freight links from Berbera in Somaliland to Ethiopia. AD Ports has committed US$250m to Luanda Port in Angola and is growing its presence across southern Africa. Masdar, ACWA Power and AMEA Power are backing clean energy projects in Togo, Senegal, Ethiopia and South Africa.
Ties between the UAE and Ethiopia have grown especially close. The UAE’s last confirmed deposit was a US$1bn transfer in 2018, alongside US$2bn in project investments. In July 2024, a currency swap agreement worth up to Dh3bn (US$820m) provided further monetary support. A proposed US$3bn railway from Ethiopia to Berbera remains at the memorandum of understanding stage, with no binding financing or construction commitments disclosed.
This expanding footprint goes beyond development finance. In Rwanda, Qatar Airways has taken a 60% stake in Bugesera International Airport and is in talks to acquire 49% of RwandAir, deepening its role in African aviation.
Long-term view
Gulf investors are willing to take a far longer-term approach than many of their Western counterparts, seeing opportunities that others often overlook.
"I think they could take a 10 or 20-year view, which is much easier when you're the sheikh or crown prince and you have that expectation on how long you're going to serve for," said Charlie Robertson, head of macro strategy at FIM Partners. "You put investment in now. African assets are so cheap."
However, the Gulf's growing presence is not without controversy. Multiple investigations, including a January 2024 UN experts' report and Reuters flight analyses, have cited an airbridge through Chad supplying arms to Sudan's Rapid Support Forces during that country's ongoing civil war. Abu Dhabi has repeatedly denied arming the RSF, insisting its operations in Chad and Sudan are humanitarian in nature.
"In countries like Egypt or Ethiopia, the Gulf is stepping in where the IMF either isn't acting or is taking too long," said Moubayed. "But it's not a free lunch — there are still expectations, just not the ones we're used to. And it's harder to track what's actually being agreed. There's much less transparency, no published programme reviews or structural benchmarks. That makes it harder for markets to price risk — and for citizens to know what their governments are signing up to."
Furthermore, MENA governments now have a broader range of funding options beyond the IMF, including Eurobond and sukuk issuance, syndicated loans, Gulf bilateral deposits and private credit funds — all of which offer faster execution and fewer conditions than traditional IMF lending.
Bond and sukuk markets have grown rapidly. Total GCC issuance reached US$147.9bn in 2024, up 55% from US$95.3bn in 2023, according to Marmore MENA Intelligence. Saudi Arabia accounted for 53.7% of the total, with the UAE contributing 26.0%.
This momentum has continued into 2025. In the first half of the year, US$92bn was raised across 215 bond and sukuk issues, according to the Markaz Fixed Income Report cited by Trade Arabia and Marmore. Corporate issuance led the growth, rising 67% year on year to US$60.2bn, reflecting deepening private sector engagement in regional capital markets.
However, both investors and multilateral institutions have become increasingly concerned about the lack of transparency in Gulf bilateral agreements. Unlike IMF programmes, which publish loan conditions, disbursement schedules and performance benchmarks, Gulf deals are often negotiated behind closed doors with little public disclosure.
"Without an IMF anchor, it's hard for the market to know what's going on — and even harder to price it," said Robertson. "One reason IMF programmes exist is to give external investors a degree of comfort that a country is being steered back towards solvency. If that's missing, it's much harder to justify new inflows."
Moreover, Saudi Arabia and the UAE continue to expand their financial footprint across the wider MENA region, not just through sovereign support but also via state-linked investment and development institutions. The Saudi Fund for Development disbursed nearly US$1bn in concessional loans across 13 countries in 2024 alone, with a focus on infrastructure, energy and education — bringing its cumulative funding to over US$20bn since 1975.
At the same time, sovereign wealth funds are leading a growing wave of direct equity and infrastructure investment. The UAE’s ADQ, Mubadala and the Investment Corporation of Dubai have deployed capital into Egypt, Morocco and Jordan — backing projects in infrastructure, logistics, agribusiness, telecoms and real estate.
In Morocco alone, Emirati commitments are estimated at above US$20bn. Saudi Arabia’s Public Investment Fund, one of the world’s largest sovereign investors, is also expanding its regional footprint. While overall Saudi FDI outflows dipped in 2024, PIF continues to back logistics, industrial and energy platforms across MENA, including port infrastructure and clean energy partnerships in North Africa.
A massive digital infrastructure buildout reinforces this investment push. Saudi Arabia aims to expand its data centre capacity from around 300MW today to 1,300MW by 2030. The UAE’s IT load is projected to rise from 496MW in 2025 to nearly 918MW by the end of the decade. These facilities will anchor regional cloud and AI networks — and underpin the Gulf’s emergence as a digital and financial hub for MENA. Rather than providing loans or aid, Saudi and Emirati capital is reshaping the region through ownership, infrastructure and long-term economic integration.
Gulf capital is also funding a new wave of airports, logistics corridors and energy infrastructure across North Africa — from major port upgrades in Egypt and Morocco to aviation hubs linking the region directly to Dubai and Riyadh. These projects are embedding Gulf states at the centre of MENA trade, data and transport networks, locking in long-term economic and political influence that extends well beyond direct financial support. Gulf financing is steadily eroding the IMF's role as the region's leading provider of external funding and policy influence.