External strains building in North Africa

The Gulf countries have benefitted enormously from higher energy prices and will run large current account surpluses. But external positions have deteriorated in other parts of the region. That, alongside tighter external financing conditions, has led to downward pressure on currencies and forced a handful of countries to open talks with the IMF. Egypt is likely to secure an agreement soon, but the policymakers in Tunisia are unlikely to agree to the Funds’ demands. A sovereign default there seems inevitable.