Gulf states’ wealth wan­ing away –IMF

Fis­cal re­forms needed or rev­enue will run out in 15 years.

The Citizen (KZN) - - World - Dubai

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. –

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