Moody's Investors Service indicated that significant domestic banking constraints in countries in the Middle East and Africa region are intensifying liquidity risks amid tightening global financial conditions. It noted that the constraints on the banks' capacity and willingness to absorb potential increases in government financing needs in the event of a shock would intensify liquidity risks in Angola, Bahrain, Ghana, Kenya and Lebanon. It said that the governments' ability to fund their borrowing needs from domestic banks depends on the latter's capacity and willingness to meet government borrowing needs, as well as on changes in the regulatory environment. Further, it said that the ability of banks in Angola, Bahrain, Ghana, Kenya and Lebanon to absorb government borrowing needs is constrained by either the large borrowing needs relative to the size of the banking sector and the banks' high exposure to government securities, or by low deposit inflows relative to the governments' fiscal deficits. In addition, Moody's pointed out that the banks' willingness to provide financing is influenced by several factors, including policy credibility or the risk-reward trade-off in lending to the private sector versus the government. It said that the vulnerabilities in the Democratic Republic of the Congo, Egypt and Nigeria's banking sectors are related to their small size or large exposure to government securities. But it considered that these constraints are mitigated by the countries' limited government financing needs or by high bank deposit growth and, as such, expected the authorities to rely on domestic banks to cover their financing needs. 
Source: Moody's Investors Service