The International Monetary Fund has released a new report for countries in the Middle East and North Africa, stating that low growth rates and oil prices should encourage these regions to continue efforts to widen their tax bases by introducing value-added taxes.
"The countries of the Middle East and North Africa region are still facing two of the world's most pressing economic and geopolitical issues: the slump in oil prices and the intensification of conflicts," said IMF Middle East and Central Asia Department Director Masood Ahmed at the report's launch in Dubai. The report highlights the significant progress many countries had made over recent months in adjusting to this new economic environment, particularly in the area of spending and new revenues. Some states have started to find cost savings in their public wage bills. For example, Saudi Arabia recently announced a number of measures to trim its government wage bill, including reduction in allowances and limiting overtime. GCC countries are also planning to introduce a value-added tax.
Mr. Ahmed stated that oil exporters have faced the difficult task of growing their economies in a climate of lower budget revenues and spending cuts. Therefore, the challenge will be finding alternative sources of revenues and economic growth to maintain the level of prosperity.
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), stated that the reforms that the GCC countries have been implementing over the past year in response to the decline in oil prices are impressive. She said continued fiscal adjustment will be needed over the medium term. "Where possible, countries should phase in deficit-reduction measures gradually, while strengthening their medium-term fiscal frameworks and fiscal transparency to support the adjustment. Policies supporting growth and employment need to be continued."
Last year, the IMF has further strengthened its relationship with the GCC countries through regular country visits, technical assistance, and training program provided by IMF being ready to continue supporting the GCC countries in addressing the challenge of adjusting to the lower oil price environment.