Fiscal efforts to bridge GCC budget deficits still falling short: IMF

Published June 9th, 2016 - 11:00 GMT
Although the introduction of a GCC-wide value added tax (VAT), and other fees, charges, and excises have been announced, most GCC countries have not yet increased non-oil revenues in a meaningful way. (AFP/File)
Although the introduction of a GCC-wide value added tax (VAT), and other fees, charges, and excises have been announced, most GCC countries have not yet increased non-oil revenues in a meaningful way. (AFP/File)

The steep drop in oil prices has led to a significant deterioration in fiscal balances of GCC countries. Despite the deficit-reduction measures adopted so far, this year’s projected budget deficits are high this year, according to the International Monetary Fund (IMF).

In a recent paper prepared by the IMF’s Middle East and Central Asia Department under the guidance of Masoud Ahmad, director of the department, the IMF warns that the fiscal consolidation measures undertaken so far fall short in addressing the magnitude of revenue shortfall from oil prices.

To the IMF estimates the GCC region and Algeria together are expected to post a fiscal deficit of 13 per cent of GDP, down from a surplus of 8 per cent in 2013, reflecting the high reliance of these budgets on oil-related revenues

The starting public debt ratios are low, and accumulated financial savings are sizeable in many — but not all — countries, pointing to significant fiscal buffers in the near term. Countries with room to borrow and ample financial savings can afford a more gradual fiscal adjustment, but all countries will need to adjust over time, given the large revenue losses from lower oil prices.


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