Evaluating Financial Sector Development in the Middle East and North Africa: New Methodology and Some New Results

Abstract

This paper assesses financial sector development in twenty Middle Eastern and North African (MENA) countries.Based on data collected on a wide range of financial sector indicators, including from surveys of country economists at the IMF in 2000 and 2002, several new indices of financial development are constructed encompassing six themes: development of the monetary sector and monetary policy, banking sector development, nonbank financial development, regulation and supervision, financial openness, and institutional quality.The paper finds substantial variation in the degree of financial development across the MENA countries.As a group, MENA countries perform relatively well in regulation and supervision.But much more needs to be done to reinforce the institutional environment and promote nonbank financial sector development.Based on a small subset of indicators for which data are widely available, the MENA region is found to compare favorably with a few other regions, but it ranks far behind the industrialized countries and East Asia.

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