IMF’s Lagarde: Gulf States to lose $275bn in oil exports this year

Qatar has previously admitted it is facing a fiscal shortfall of 4.9 percent of Gross Domestic Product in 2016 and of 3.7 percent in 2017 due to falling oil prices.

The annual budgeting process should be aligned with this new medium-term framework so that spending overruns are eliminated, it had said, adding while there was no immediate concern about fiscal sustainability under its oil price assumptions, additional spending and revenue measures warranted over the medium term to secure inter-generational equity in the context of low oil prices.

The “considerable” fall in fiscal surplus in 2015, against 12.3% in 2014, reflects a relatively quick pass-through of lower oil prices on budget revenues.

She urged governments to slow growth of their current spending, taking aim at their practice of giving cushy, high-paying jobs to their citizens to ensure political support.

However, while oil prices are highly unlikely to rise in the coming years, all GCC member states will have to change their fiscal policy.

“Given the new fiscal realities, there is not room for public wage bills to grow further”. Prudent policies over the past decade have enabled them to build up financial buffers which avoid the need for a sudden disruptive adjustment in fiscal policy.

She said the “size and urgency of this adjustment” varied for countries across the GCC, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

“Those who have not done it can certainly learn from those who have”, she said without naming individual countries.

“Governments should continue to take steps to switch the focus of growth away from the public and toward the private sector”, Lagarde said in her speech, which was emailed to Anadolu Agency. Well-planned fiscal consolidation strategies need to be put in place, the International Monetary Fund Chief said. From its part, Qatar is doing it effectively. At present, oil prices are hovering around $50 per barrel. “Nevertheless, as oil revenues decrease, external financing conditions tighten, and government debt issuance increases, central banks will need to remain vigilant for stresses in the system and provide liquidity to the financial sector if needed”, Lagarde added.