The International Monetary Fund said yesterday oil exporting countries in the Middle East continue to have the world's largest energy subsidy bill and that additional reforms are still needed to curb government spending. In its updated regional outlook report, the IMF said money spent each year on subsidies from these oil exporting countries is down from $190 billion in 2014 to a current estimate of $86 billion a year. This was largely due, however, to a global decline in energy prices since mid-2014, when prices had climbed above $100 a barrel.
Persistently lower oil revenues have forced governments to consolidate spending, particularly in the Gulf where many citizens have grown accustomed to generous perks, subsidies and cushy public sector jobs as a result of their countries' oil wealth. Across the Middle East, oil exporting countries were able to reduce overall budget deficits to an estimated $375 billion for the five year period between 2016 and 2021, down from last year's projected $565 billion deficit.
To reduce spending, the six Gulf Cooperation Council (GCC) countries of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates have implemented sensitive austerity measures, including lifting some subsidies, including on gas and electricity.
However, it was largely a bump in the price of oil from an average of $42 a barrel in 2016 to a projected $55 a barrel in 2017 that helped run down the expected deficit of GCC countries to $240 billion, from a 2016 projected outlook of $350 billion.
"Going forward, we believe additional reforms are still needed as well as fiscal reforms for the GCC countries to keep reducing the level of deficit," said Jihad Azour, IMF's Mideast and Central Asia department director.
The IMF report said 6.5 million people will be entering the workforce by 2022 in the oil-exporting countries of the GCC, Iran and Algeria - meaning these countries will urgently need to create more private sector jobs. Although an agreement last year by major oil-producing countries to cut crude oil output helped increase prices, the outlook for the oil market remains uncertain.
