In a continuing discussion of whether the government is crowding out the domestic non-financial private sector and the implications that has, the IMF calculates the representative GRE ROA over the period at 2.5% a year. The private sector, consistent with all theory and research, at an 8.1% ROA has outperformed the government by 225% a year. Now there are plenty of arguments to be made that the IMF’s computation of the GRE’s ROA is not completely accurate, but one has to draw the line at believing that the IMF could be wrong by 225%. The IMF is diplomatic in its conclusion – leave business to businessmen. There is some good news. The total GRE debt as a percentage of GDP has dropped strongly in Abu Dhabi and to a lesser extent in Dubai. Importantly for Abu Dhabi, the percentage of GRE debt that is loans as opposed to bonds dropped to 33% from 68%. This is important, as it allows private companies more room to borrow. Abu Dhabi is showing a clear corporate governance push to stop GREs from crowding out the private sector in the loan markets
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