Oil price slump: Gulf states will face budget shortfall, warns IMF chief
Oil-dependent Gulf states will face budget shortfalls if the recent decline in oil prices persists, warned the International Monetary Fund (IMF) Chief Christine Lagarde.
A sustained decline of $25 a barrel in the oil price would reduce the revenues of most Gulf countries by eight per cent of gross domestic product, “and put many of them into a fiscal deficit situation,” Lagarde told reporters. But the six nations of the Gulf Cooperation Council (GCC) have built up fiscal buffers to cope with the immediate impact of the reduction in revenues, she said. The combined GDP of the GCC last year reached $1.64 trillion, so in this scenario the annual revenue of the six nations could plunge by roughly $130 billion.
Ninety per cent of total revenue of the GCC states comes from oil — more than doubled from $317 billion in 2008 to $756 billion in 2012. It faced a slight decline to $729 billion last year, according to IMF estimates.
Lagarde called on GCC states to implement reforms and stressed the urgent need for fiscal consolidation -- an appeal echoed by Kuwait’s finance minister.
Anas al-Saleh urged steps to tackle rising public spending, mainly on wages and subsidies, as well as efforts to boost the role of the private sector. “Comprehensive economic reforms, including reforming distortions in the public finances, should be enforced,” he said. Saleh said the Gulf states must diversify their economies and “reduce dependence on oil”.
Forecasts indicate a healthy economic growth for the six GCC nations averaging 4.5% in 2014-2015, Saleh said.
“But these forecasts should be treated with caution in light of fast-paced regional and international developments,” the Kuwaiti minister added.
Published in The Express Tribune, October 26th, 2014.
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Lets remember that OPEC was formed for the purpose for fixing the price of oil above what would normally be a fair market price .. now that the USA energy production has increased dramatically it's monopoly is coming under pressure. Nobody should have sympathy for the OPEC crooks.
Remember the days of Sheik Zaki Yamani when he used to go around bragging and now the only resource is falling in price.....OPEC going down?