EconSource: IMF Warns Gulf States to Make Major Fiscal Adjustments

The International Monetary Fund (IMF) is warning Gulf states to speed up fiscal reforms. To counter sustained low oil prices, Gulf states and other major Middle East oil producers need to make “difficult decisions” and “major adjustments,” IMF Middle East Director Masood Ahmed said at the Arab Strategy Forum in Dubai. The IMF estimates that Middle East oil exporters have lost $300 billion in revenue this year due to the decline in oil prices. “The big challenge for the [Middle East] oil exporting countries for next year will be continue to adjust to the impact of low oil prices,” Ahmed said. He underlined the need to implement a value added tax, review the size of the public sector, and remove energy subsidies. He warned that the slowdown in the non-oil private sector will continue into 2016 as a result of heavy dependence on government spending. [Gulf News, 12/15/2015]

Turkey’s Davutoglu says debate over central bank independence overblown
The recent debate over the independence of the Turkish Central Bank is “overblown,” Turkish Prime Minister Ahmet Davutoglu said Monday. He said the bank would take “necessary steps” after an expected rate increase from the US Federal Reserve this week. “I don’t think the Fed’s impact on us will be too long-lasting or unsettling,” Davutoglu said. His comments did little to relieve pressure on the lira, which has lost 1.57 percent of its value against the dollar since late on Friday. Turkey’s current deficit account, which stood at around $130 million, remains fragile but is under control, Davutoglu said. The government has a wide reform plan to improve Turkey’s investment environment and will hold meetings next month and in February with foreign investors, governments and institutions, he added. [Reuters, 12/14/2015]

Egypt aims to reduce oil product subsidies
Egypt is relaxing a commitment made by the previous government to abolish subsidies on gasoline, diesel, and natural gas, following a slide in crude oil prices and the discovery of an offshore gas field. The previous government had committed to removing the subsidies, however Prime Minister Sherif Ismail said on Monday that Egypt now plans to reduce the subsidies to 30 percent of where they stood in July 2014. “We respect the previous government’s decisions and are committed to them, but there are changes we need to adhere to in the case of oil product subsidies, such as global energy prices and new discoveries,” Ismail said. Ismail is due to meet Saudi Arabian Deputy Crown Prince Mohamed bin Salman today. They will discuss another Saudi Arabian deposit in Egypt’s central bank. The government is targeting close to 6 percent growth in gross domestic product a reduction in its budget deficit to 8.5 percent by the end of the 2017-2018 financial year, Ismail said. [Reuters, 12/14/2015]

ISIS extorts millions from captive residents in Syria and Iraq
The Islamic state (ISIS or ISIL) is extorting hundreds of millions of dollars from residents in Syria and Iraq using an army of tax collectors and informants, an investigation by the Financial Times has found. ISIS reportedly earns as much from taxation, extortion, and confiscation as it does from oil revenues oil, which brought in $450 million over the past year. People living in ISIS-controlled territory are forced to pay zakat, a religious tax, to fund salaries that attract recruits and pay for services such as street cleaning and bread subsidies. Taxes on government salaries in Mosul, Iraq alone probably netted the group $23 million this year, according to estimates based on employee counts by Iraqi officials. The amount of zakat on grain and cotton was worth over $20 million, according to estimates based on statistics provided by Iraqi officials and Syrian farmers. If seizures of government grain stores are included, the group controls $200 million. [FT, Daily Mail, 12/14/2015]

IMF to agree to Iraq monitoring program in coming days
The International Monetary Fund (IMF) will finalize an agreement with Iraq in coming days for a program to monitor its economy, the fund’s Middle East Director Masood Ahmed said. The monitoring program would establish a track record of effective performance on the part of the Iraqi authorities, which could lead to a finance program being agreed to next year. Iraqi authorities agreed last month to have the IMF monitor Baghdad’s economic policies, with the program aimed at reining in spending and reducing Iraq’s budget deficit. [Reuters, 12/15/2015]

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