IMF urges spend­ing cuts in Gulf

> Mod­est re­cov­ery in oil prices not enough to fill fi­nanc­ing gaps, says In­ter­na­tional Mone­tary Fund

The Sun (Malaysia) - - SUNBIZ -

DUBAI: A mod­est re­cov­ery in oil prices falls short of fill­ing bud­getary gaps in crude-ex­port­ing Gulf coun­tries, the In­ter­na­tional Mone­tary Fund said (IMF), stress­ing the need to cut spend­ing.

The price of the re­gion’s main com­mod­ity has par­tially re­bounded and is hov­er­ing around US$50 (RM209.90) per bar­rel hav­ing hit a 10-year low of less than US$30 in Jan­uary, from a peak of more than US$100 in mid-2014.

The re­cov­ery “will def­i­nitely help in terms of the fi­nan­cial num­bers for this year” for the coun­tries of the Gulf Co­op­er­a­tion Coun­cil, said Ma­sood Ahmed, the IMF’s direc­tor for the Mid­dle East.

“But it doesn’t re­ally change the fun­da­men­tal out­look for GCC coun­tries or the chal­lenges that face them,” he told AFP in an in­ter­view Tues­day.

Oil was ex­pected to sta­bilise at around US$60 per bar­rel in the medium term, he said, a rate lower than the bud­getary breakeven point for some of the six na­tions.

In its re­gional eco­nomic out­look re­port re­leased yes­ter­day, the IMF cited a breakeven price for Saudi Ara­bia, Qatar and the United Arab Emi­rates at US$79.70, US$62.10 and US$58.60 re­spec­tively.

The level drops to US$47.80 per bar­rel in the case of Kuwait, but it shoots to US$77.50 and US$93.80 in the case of Oman and Bahrain re­spec­tively.

“(This) means that GCC coun­tries as a group still have to try and bal­ance their bud­gets,” said Ahmed.

GCC coun­tries had to cut back their spend­ing “one way or another” over the next five years and find ways of rais­ing non-oil rev­enues, he said.

The IMF re­gional chief said eco­nomic growth in the GCC as a whole was ex­pected to be at just un­der 2% in 2016.

Next year would see a “mod­est im­prove­ment,” rising to be­tween 2% and 2.5%.

Saudi Ara­bia would grow 1.2% this year, down from 3.5% in 2015, while Kuwait and Qatar’s economies would ex­pand by 2.5% and 2.6% re­spec­tively.

The UAE, which has been ahead of its Gulf peers in di­ver­si­fy­ing its econ­omy, would see growth of 2.3% this year.

Record-high oil prices in the past few years have al­lowed GCC economies to ex­pand rapidly, and gov­ern­ments were able to in­vest heav­ily on in­fra­struc­ture projects.

But the drop in oil rev­enues pushed these gov­ern­ments to shelve many of them.

GCC coun­tries also took the pre­vi­ously un­think­able mea­sure of cut­ting en­ergy sub­si­dies.

“Now we’re get­ting into some of the more dif­fi­cult ar­eas, such as look­ing at the pub­lic sec­tor wage bill,” said Ahmed, point­ing out that it amounts to a large part of ex­pen­di­ture in some GCC coun­tries.

Saudi Ara­bia an­nounced last month new dras­tic aus­ter­ity mea­sures, cut­ting salaries of cab­i­net min­is­ters by 20%, slash­ing perks for the 160 mem­bers of the con­sul­ta­tive coun­cil and lim­it­ing over­time pay and al­lowances for civil ser­vants.

Its mea­sures rep­re­sent one of the ways for GCC coun­tries “to ad­dress this is­sue of how to bring their bud­gets into bal­ance,” said Ahmed. – AFP

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.