Gulf states’ wealth waning away –IMF
Fiscal reforms needed or revenue will run out in 15 years.
The International Monetary Fund (IMF) said on Thursday Gulf Arab states could see their financial wealth depleted in the next 15 years amid lower hydrocarbon revenues if they don’t step up fiscal reforms.
The six-nation Gulf Cooperation Council (GCC), whose net financial wealth the IMF estimates at $2 trillion (About R30 trillion), accounts for over one fifth of global oil supply, but economies in the region have been hit hard by a drop in oil prices in 2014 and 2015.
While lower crude prices have put pressure on governments to generate non-oil revenues and fix their finances, “the effect of lower hydrocarbon revenue is yet to be fully offset”, the IMF said in a report. “At the current fiscal stance, the region’s existing financial wealth could be depleted in the next 15 years”.
The Washington-based international crisis lender said global oil demand could peak by around 2040 or much sooner in case of a stronger regulatory push for environmental protection and energy efficiency. “All GCC countries have recognised the lasting nature of their challenge ... However, the expected speed and size of these consolidations in most countries may not be sufficient to stabilise their wealth.”
Gulf states have for decades used their energy wealth to provide millions of citizens with government jobs, part of a social contract by rulers that rewards political acquiescence and educational attainment with employment for life. But high-paying public sector jobs that demand little of workers have translated into low productivity and an entitlement culture. –