An aid package of around $50 billion pledged to 10 countries in the Middle East and Africa by the higher-rated countries in the Gulf has been examined by S&P Global Ratings in a new report.

The report titled "How Middle Eastern And African Sovereigns Benefit From Gulf Financial Support" published on RatingsDirect also compares this year’s aid packages past donor support from GCC countries.

Historically, funding from higher-rated GCC countries (Saudi Arabia, the United Arab Emirates, Kuwait and Qatar) has supported a smaller group of strategic allies. Recent pledges to a broader group of countries reflect a more active foreign policy and evolving geopolitical priorities.

"In our experience, the actual disbursement of aid from the GCC is not always consistent, fully disbursed, or large enough to alleviate financial pressures for the recipient countries," said S&P Global Ratings analyst Zahabia Gupta.

"We anticipate that GCC sovereigns will likely prioritize funding to key regional partners in the context of volatile oil prices, weaker GCC net asset positions, and their respective domestic agendas of diversifying their economies away from hydrocarbons."

S&P Global Ratings expects that further support from the GCC countries in the event of financial stress would be forthcoming for Bahrain, Oman, and Jordan. This expectation offers additional support for the ratings on these three sovereigns. There continue to be strong political and economic ties among GCC sovereigns (barring the dispute with Qatar).

More importantly, S&P Global Ratings said that GCC countries will strive to prevent contagion effects from pressure on the currency pegs of Bahrain or Oman and spillovers of social and sectarian tensions. Strong support from the US is also expected for Jordan.

"We note that the funding mix of recent donor pledges is more debt-like," said Gupta. "Budget grants, the most fungible form of aid, are becoming less prevalent. Deposits in the central bank and other forms of conditional aid are increasingly the norm." – TradeArabia News Service