Sovereign Wealth Funds in the New Era of Oil

By Rabah Arezki, Adnan Mazarei, and Ananthakrishnan Prasad 

(Versions in عربي and 中文)

As a result of the oil price plunge, the major oil-exporting countries are facing budget deficits for the first time in years. The growth in the assets of their sovereign wealth funds, which were rising at a rapid rate until recently, is now slowing; some have started drawing on their buffers.

In the short run, this phenomenon is not cause for alarm. Most oil exporters have enough buffers to withstand a temporary drop in oil prices. But what will happen if low oil prices persist, and how will policymakers react?

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Building Bridges To The Future In The Gulf

Christine LagardeBy Christine Lagarde

(Versions in عربي)

Two days ago, I had the pleasure of visiting Kuwait, a member country of the Gulf Cooperation Council (GCC). It was a whirlwind visit, with many places to see and people to meet, in a thriving corner of the global economy. Kuwait has extended to me its emblematic tradition of hospitality— a testament to its ancient and noble culture. I was awed by the magnificent artifacts of the al-Sabah collection, which I saw in the beautifully restored Dar al-Athar al-Islamiyyah cultural center.

Back to economics. The member countries of the council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have some of world’s highest living standards. The region has also become a major destination for foreign workers and a source of remittances for their families back home. And it is a financial center and a hub for international trade and business services.

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Support the People, Not Energy in the Middle East and North Africa

Masood AhmedBy Masood Ahmed

(Versions in عربي, 中文, Français, 日本語Русский, and Español)

Of all the regions in the world, the Middle East and North Africa region stands out as the one that relies the most on generalized energy subsidies. In energy-rich countries, governments provide subsidies to their populations as a way of sharing the natural resource wealth. In the region’s energy-importing countries, governments use subsidies to offer people some relief from high commodity prices, especially since social safety nets are often weak.

The question is: does this well-intended social protection policy represent the most efficient way to channel aid to the most vulnerable? The answer is no!

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Middle East and North Africa Face Historic Crossroads

If there is one fact I think sums up the problems of the Middle East and North Africa, it is that the non-oil exports of the whole region, are $365 billion, about the same as the exports of Belgium, a country of 11 million people, compared with the 400 million people who make up the Arab world. This is a crucial indicator of the nature and size of the structural adjustment problem the Arab countries in transition face.

Financial Support for Arab Countries in Transition

The IMF’s assistance varies across the region, given that each country faces its own economic challenges, and the instruments to tackle those challenges must be tailored to address those unique circumstances. I am pleased to say that a few days ago, in response to the authorities’ request, the IMF Board approved two loans in support of the economic reform agendas of Arab countries in transition: one for Jordan under a Standby Arrangement in the amount of $2.05 billion, and another for Morocco in the amount of $6.2 billion under our Precautionary and Liquidity Line (PLL). This follows on our earlier concessional loan to Yemen under the Rapid Credit Facility.

Without Better Data, Middle East Policymakers Risk Getting Lost

The Middle East and North Africa (MENA) region suffers significant shortcoming in data, which are particularly problematic at a time economic transition. There are important data gaps, poor data quality and in many cases, internationally agreed standards of statistical methodologies, compilation periodicity and timeliness, and data dissemination practices are not followed.

Why the Arab World Needs an Economic Spring

Just as the "Arab Spring" opened a debate about politics in the Middle East, we now need an "Economic Spring" on how to rethink the region's economic future. Of course each country will have to define its own strategy, but there will be some common issues that will have to be addressed.

Arab Countries in Transition Under the Spotlight

Historic transitions in several Arab countries are coming under increasing strain. Domestic uncertainty over the countries’ future course, compounded by the global slowdown and rising oil prices, took a toll on growth in 2011, and the current year will be equally challenging. A joint and sustained effort is needed to help these countries navigate through this challenging period and set out an economic vision that is fair and inclusive.

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