ISLAMABAD – While urging Gulf Cooperation Council members to push aheadwith economic reforms, the International Monetary Fund admitted that thenew policy will have “a multitude of socio-economic consequences”.
The International Monetary Fund (IMF) has warned that Gulf states will beat risk of their oil wealth vanishing in the next fourteen years if theyfail to undertake further economic reforms.
In a study released earlier this week, the IMF claimed that “at the currentfiscal stance, the region’s financial wealth could be depleted by 2034”oreven faster, turning the region into a net borrower.
The study specifically referred to the Gulf Cooperation Council (GCC) ofBahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates, whichaccounts for a fifth of the world’s crude supplies.
“Ongoing reforms are moving the GCC region in the right direction, but theyneed to accelerate,” the IMF stressed, praising most GCC states’ drive toembark on economic diversification and reform programmes that includesubsidy cuts, raising power prices and even introducing value-added tax andother forms of taxation.
Apart from the diversification, the reforms should include reductions ingovernment expenditure and the introduction of broad-based taxes.
Additionally, the GCC will have to reform their massive civil servicesectors, and reduce public wage bills, according to the IMF.
At the same time, the global lender cautioned that the proposed measures”would have a multitude of socio-economic consequences affectingemployment, household incomes, and business confidence and investment”.
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The reforms are expected to come as the global energy market goes through afundamental change, with climate change-related concerns prompting theworld to shift to renewable sources, according to the study.
“This outlook spells a significant fiscal sustainability challenge for theGCC region”, which the IMF said should brace itself for long-term lowerhydrocarbon demand and lower energy prices.
Gulf Region Tensions
The study comes amid simmering tensions in the Gulf region which weresparked by the standoff between the United States and Iran that has been inplace since Washington’s unilateral withdrawal from the 2015 Iran nucleardeal in 2018.
In May 2019, four commercial vessels, including two Saudi Arabian oiltankers, were sabotaged in the waters off the UAE’s Fujairah, in what theUS claimed was the work of Iran, which in turn denied the accusations.
In September, a drone attack on Saudi Aramco oil facilities caused majorfires and partially disrupted the country’s oil production, affectingglobal oil prices. Washington again pointed the finger at Tehran which saidthat the allegations held no water. -Sputnik
