The International Monetary Fund (IMF) says a fall in oil prices and deepening turmoil in parts of the Middle East will keep real gross domestic product (GDP) growth subdued this year at 2.5 percent. The IMF’s Middle East economic outlook report, which was launched on Wednesday, says the region’s oil exporters have lost $360 billion in revenues this year due to the fall in prices. The report called on Gulf economies to adjust to the “new reality” of low oil prices and emphasized the importance of reforms that will create more jobs and diversify oil-dependent economies. IMF Middle East and Central Asia Chief Masood Ahmed said, “Not only this year, but for the years to come, these countries will need to make an adjustment to better balance their spending to the new reality of the oil prices.” He told Bloombergthat Saudi Arabia, Bahrain, and Oman have the most crucial long-term challenges that need to be addressed. “It is very clear that Saudi Arabia needs a sizeable, structured, multi-year fiscal adjustment,” Ahmed told Reuters. He said that Saudi authorities are “evaluating all areas” but that it is not yet clear how they will decide to balance the tradeoffs involved in fiscal reforms. Ahmed told the Wall Street Journal that while oil-rich countries have the capacity to borrow more to cover their deficits, time is running out because most countries in the region will have burned through their reserves within five years. [AFP, AP, Bloomberg, FT, 10/21/2015]
IMF may offer major loan to Iraq in 2016
The International Monetary Fund (IMF) may provide a large loan to Iraq in 2016 to help stabilize the country’s finances, Director of the IMF’s Middle East and Central Asia Department Masood Ahmed said. An IMF team will meet with Iraqi officials early next month to discuss how to create a Staff-Monitored Program for Baghdad, an arrangement under which the IMF would monitor Iraq’s economic policies. Ahmed said the loan would be a “multiple” of the $1.24 billion in emergency funding that the IMF agreed to provide to Iraq in July. He noted that said Baghdad is not in immediate danger of running out of money because it could postpone investment projects and, if necessary, rely more on financing from the central bank. However, he said the government needs to come up with a clear, comprehensive plan to repair its finances and that an IMF monitoring program could help. Ahmed also said the IMF would soon send a team to Jordan to discuss a loan program. [Reuters, 10/21/2015]
Egypt appoints new Central Bank governor
Egyptian President Abdel Fattah al-Sisi has appointed Tarek Amer as the new governor of Egypt’s Central Bank following the resignation of Hisham Ramez. Amer, who previously served as First Deputy Governor of the Bank, will take charge of the Central Bank after the end of Ramez’s term ends on November 26, the presidency said. From 2008 to 2013, Amer served as chairman of the state-owned National Bank of Egypt, where the presidency said he undertook reforms that were “applauded by regional and international financial institutions.” The decision comes less than a week after multiple depreciations of the Egyptian pound. Ramez has faced increasing criticism in recent months as the Egyptian pound has come under pressure and reserves have tumbled. London based Capital Economics said that the announcement suggests a further devaluation of the Egyptian pound. On Tuesday, the Central Bank decided to hold the pound steady. Egypt’s Finance Ministry said Tuesday that Egypt’s budget deficit in the first two months of the fiscal year stands at 2.4 percent. [Reuters, Ahram Online, Bloomberg, DNE, Aswat Masriya, 10/21/2015]
Turkish Central Bank keeps rates steady but signals tighter policy ahead
Turkey’s Central Bank left interest rates unchanged on Wednesday but signaled a tighter policy ahead. Economists expect Turkey will raise rates at some point to bolster the weak lira and fight high inflation. The Central Bank has signaled that wants to wait to see the impact of an expected US Federal Reserve move before adjusting its own policy. It said that it would maintain tight monetary policy in line with inflation expectations and that exchange rate movements were delaying an improvement in core indicators. “Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained,” the bank said in a statement. [Reuters, 10/21/2015]
Morocco subsidy spending to fall to $1.6 billion in 2016
The Moroccan government plans to spend 15.5 billion dirhams ($1.61 billion) on subsidies, down from 23 billion dirhams budgeted for this year, as a result of low energy prices, according to a 2016 draft national budget. The government is also planning to fully liberalize gasoline and diesel prices starting on December 1. The government said gross domestic product would grow by 3 percent in 2016, down from an estimated 5 percent in 2015. The forecast is more ambitious than that of Morocco’s Planning Agency, which projected growth of 2.6 percent in 2016. Morocco has done more than most North African countries to make painful changes required by international lenders to curb deficits, such as ending fuel subsidies and freezing public sector hiring. [Reuters, 10/20/2015]
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