The International Monetary Fund (IMF) revealed that the Arab Gulf countries may witness the depletion of their financial wealth within the next 15 years in light of the decline in oil and gas revenues, unless financial reforms accelerate.
“In light of the current financial situation, the existing financial wealth of the region may be exhausted in the next fifteen years.” IMF said in a report on Thursday.
IMF added that global oil demand could peak in 2040 or sooner if regulatory efforts to protect the environment and rationalize energy consumption are supported.
IMF also pointed out that “all the countries of the Gulf Cooperation Council recognize the unchanging nature of the challenge they are facing … but the expected speed and size of these financial control measures may not be sufficient to stabilize the wealth of most countries.”
While low crude prices press governments to collect revenues from non-oil resources and remedy their financial conditions, “the impact of low oil and gas revenues has not yet been fully compensated,” according to IMF.
During the past years, the governments of the Gulf states launched gradual austerity measures to reduce the deficit in the annual budgets, without creating social unrest.
Gulf governments have resorted to steps such as the introduction of value-added tax in some countries, however, most countries still find it difficult to balance fiscal discipline and growth.
IMF indicated that “the introduction of value-added tax and selective taxes was a positive step, and there is a great opportunity for this progress to create a basis favourable for building."
It pointed out also that as the region shifts towards a non-oil economy, its shift from diversified fees to lower large-scale taxes, for example, may bring about much-needed income diversification.
It is worth noting as well that the six Gulf Cooperation Council countries, whose the IMF estimates a net worth of two trillion dollars, owns more than one fifth of the global oil supply, but the region's economies were severely affected by the drop in oil prices in 2014 and 2015.
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