EconSource: World Bank Says GCC countries Need to Slash Public Spending

The World Bank’s chief economist for the Middle East and North Africa, Shanta Devarajan, said Tuesday that while falling oil prices have led to welcome subsidy reforms in Gulf countries, they urgently need to develop new ways to distribute oil wealth and shrink the public sector. In April, the World Bank estimated the decline in crude oil prices could cost the Gulf Cooperation Council (GCC) countries 14 percent of their combined gross domestic product (GDP) this year. Consequently, the region may record a fiscal deficit for the first time in four years. Devarajan said GCC countries should think about giving the funds used to keep fuel prices artificially low directly to local people. Devarajan added that the region needs to tackle its bloated public sector. He estimated that some 80 to 90 percent of the male domestic labor force is employed in public sector jobs. [Reuters, 6/9/2015]

Iraq slashes oil output targets to ‘more realistic’ levels
Iraq on Tuesday again reduced its ambitious oil output growth targets, saying it would raise production by almost 60 percent by 2020 at best, an indication that the country is bringing its production targets in line with lower oil prices. Iraq has repeatedly revised the target due to delayed investments, red tape, infrastructure bottlenecks, and a fight against Islamist militants. On Tuesday, Falah Alamri, head of Iraq’s State Oil Marketing Organization (SOMO), told an industry conference in London that the country was now aspiring to produce 5.5-6.0 million bpd by 2020, down from the previous target of 8.4-9.0 million bpd. Baghdad has asked oil majors such as LUKOIL, BP, Royal Dutch Shell, ExxonMobil, and Eni to revise development plans by considering postponing new projects and delaying already committed investments. [Reuters, 6/9/2015]

ISIS expands near Libya’s largest oil terminal
The Islamic State (ISIS or ISIL) has strengthened its hold over territory west of Libya’s largest oil terminal after seizing Sirte. Its claim to have finally succeeded in taking the town was made in statements on social media late on Tuesday, just after it overran a nearby power station. ISIS already controls the desert town of Naufaliya, about thirty miles from Libya’s largest export terminal of Es Sider and neighboring Ras Lanuf, the third-largest terminal. Controlling Sirte helps cement those positions on the west side of the so-called Sirte Basin, which is home to about 70 percent of the country’s crude reserves. [Bloomberg, 6/10/2015]

Egypt signs African FTA agreement, ratification awaits parliament
Egypt signed on Wednesday, along with twenty-five African nations, an agreement to form the continent’s largest free trade area (FTA). The agreement, part of a larger-scale African agenda for 2063, will integrate the three existing economic zones: the Common Market for Eastern and Southern Africa, the Southern African Development Community, and the East African Community. The FTA accounts for over half of the continent’s gross domestic product (GDP) and aims to create free trade zones for goods, with the eventual introduction of services and investor opportunities. An FTA covering the entire African continent is expected to be formed by 2017. However, Egypt’s final ratification of the agreement depends on approval from the parliament, which is yet to be elected. [Ahram Online, 6/10/2015]

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