The International Monetary Fund (IMF) on Monday called on Saudi Arabia to undertake fiscal changes and diversify its economy in order to boost growth and create jobs. As oil prices fall and and high public spending erodes Saudi reserves, the IMF said the country should consider a “sizable multi-year fiscal adjustment.” Such an adjustment would include revising energy subsidies, controlling public sector wages, and expanding non-oil revenues. The IMF also proposed that Saudi Arabia implement a value-added tax and a land tax. Saudi Arabia’s gross domestic product will grow by 2.8 percent this year and 2.4 percent in 2016, the IMF added, compared to 3.5 percent growth last year. The IMF warned that a large deficit caused by falling oil revenues and an increase in spending would “erode the fiscal buffers built up over the past decade.” [WSJ, Bloomberg, 8/18/2015]
Turkey’s central bank leaves rates unchanged
Turkey’s central bank left interest rates unchanged on Tuesday after a drop in food and energy prices eased inflationary pressures, maintaining a cautious stance as political uncertainty drives the lira to record lows. The lira has plunged more than 19 percent so far this year, making it one of the worst-performing emerging market currencies and underscoring the need for a rate hike, according to economists. While the bank kept its benchmark one-week repo rate unchanged at 7.50 percent, it said it would implement a tighter liquidity policy and outlined plans to narrow its interest rate corridor as part of a road map to normalize its monetary policy. [Reuters, WSJ, Bloomberg, 8/18/2015]
Iraq hires banks for $6 billion international bond sale
Iraq has hired banks for its first international bond issue in almost a decade as it seeks $6 billion to help fill a widening fiscal deficit. The government appointed Citigroup Inc., Deutsche Bank AG, and JPMorgan Chase & Co., said Muneer Mohammed Omran, director general of the central bank’s investor department in Baghdad. The bond will be issued in tranches, with the first sale occurring this year, he said. The country plans to meet with international investors as soon as next month regarding the bond issuance. [Bloomberg, 8/18/2015]
Tunisia to create free-trade zone with Libya
Tunisian Minister of Trade Ridha Lahouel has confirmed that a free trade zone will be created in the in the area of Shousha on the border between Tunisia and Libya. Lahouel said that the zone would will be established as soon as possible. A second free trade zone would also be created on the Algerian border, he said. The establishment of the free trade zones marks an effort to control the large amount of illicit trade that takes place at the borders. [Libya Herald, Libya Monitor (subscription), 8/17/2015]
Preliminary estimates show 4.2 percent economic growth in Egypt
According to preliminary estimates, Egypt’s economy grew approximately 4.2 percent in the 2014/2015 fiscal year with positive indicators on unemployment and inflation, said Prime Minister Ibrahim Mahlab. Egypt is anticipating 5 percent economic growth during the current fiscal year. Mahlab said the government aims to overcome major economic challenges “through massive procedures to correct the economic track and achieve significant growth rates and development.” He referenced several mega-projects the government has undertaken, including the new Suez Canal and a housing project. [DNE, 8/18/2015]
Also of interest
Saudi Aramco to appoint CEO of trading arm | Reuters
Saudi, Egypt stocks fall as US oil hits low | Reuters
Dubai market extends rebound; other Gulf markets flat | Reuters
UAE says introducing VAT delayed by disagreement in region | Reuters
UAE, India plan $75 billion infrastructure fund | Reuters
Egypt agricultural project boosted to 1.5 million feddans | Ahram Online
Tunisia allows Libyan flights after six month shutdown | Reuters
Algeria calls for non-OPEC output cut to stop oil price fall | Bloomberg
Morocco Jan-July trade deficit falls 20.5 percent on cheaper oil | Reuters