IMF chief urges Gulf states to adapt to sustained oil price drop

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Tuesday 10 Nov 2015 - 12:50 Makkah mean time-28-1-1437 Doha, (IINA) - International Monetary Fund Managing Director Christine Lagarde warned on Sunday that global energy prices could remain low for years to come, and she urged Gulf countries to adjust their budgets accordingly, AFP reported. Speaking in Qatar's capital city of Doha after meeting ministers and officials from the six-nation Gulf Cooperation Council (GCC), Lagarde warned that the countries could no longer rely on revenues from oil and gas. "We believe that the price of oil will probably persist at the level where it is for a number of years and, as a result, all GCC countries should undertake some degree of fiscal adjustment", she said at a news conference. She said the IMF believed growth across GCC countries would fall from 3.2 percent this year to 2.7 percent in 2016. Lagarde also said that export revenues would be $275 billion lower this year than in 2014 because of low energy prices. The price of oil has dropped by more than half since the beginning of 2014, with Brent crude, the international benchmark, trading Friday at $47.42 per barrel for December. Lagarde said adjustments should include "firm control" on spending, particularly on public sector wages, and encouraging private sector growth. "Well-planned fiscal consolidation strategies need to be put in place as soon as possible and communicated so that people understand how the adjustment will take place", she said. She added 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. One of those countries that will have to adjust is Qatar. The 2022 football World Cup host has embarked on an enormous capital-spending program in recent years. At the same conference, Qatar's Finance Minister Ali Shareef Al-Emadi confirmed that his country would run a budget deficit next year. "Given what we see today with oil prices, we expect that we are going to have a deficit and we are going to be realistic in terms of our approach", he said. Qatar has previously admitted it is facing a fiscal shortfall of 4.9 percent of Gross Domestic Product in 2016 and 3.7 percent in 2017 due to falling oil prices. Qatar's emir, Sheikh Tamim bin Hamad Al-Thani said that he hoped the global fall in energy prices would help reduce dependency on the state in Qatar. In a related context, Al-Thani warned of "wasteful spending, overstaffing and a lack of accountability" in the country at a meeting of Qatar's Advisory Council, and he raised concerns about "dependency on the state to provide for everything". AG/IINA