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IMF warns Arab states against complacency over debt

AFP  |  Dubai 

The today warned Arab states against complacency over a looming debt crisis, urging continued economic reforms despite a rise in prices.

Crude prices have rebounded in the region thanks to a deal by producers to trim production, but the IMF said such a change in fortunes should not get in the way of overhauling state spending.

"Required reforms include further steps toward full elimination of energy subsidies, and changes to pension and -- including revisions to retirement age and benefits," the IMF said in its Regional Economic Outlook for May.

Jihad Azour, of the IMF's and department, told AFP prices should spur change.

"We should not be complacent... prices are going up. That definitely does not mean that we should not introduce the reforms. On the contrary, the current environment offers the opportunity to accelerate some of these reforms," Azour said.

have reached around $75 a barrel from under $30 a barrel in early 2016.

Overall growth in the and (MENA) region, which includes all Arab countries and Iran, was forecast by the IMF to reach 3.2 percent this year compared to just 2.2 percent in 2017.

The partial recovery in will be a boost for the states -- Bahrain, Kuwait, Oman, Qatar, and -- which supply almost a fifth of global

After the GCC saw their economic growth shrink by 0.2 percent last year, impacted by a 0.7 percent contraction by the Saudi economy, their is expected to return to growth in 2018.

The Council's is forecast to grow by 2.2 percent this year and 2.6 percent in 2019, the IMF said.

Following the in mid-2014, GCC members undertook fiscal measures and reforms to cut public spending and boost

Azour said that Saudi Arabia's economic consolidation measures to cut a persistent budget deficit and diversify the away from oil remains the correct policy.

"The current strategy that is based on reaching a balanced budget by 2023 is the right one," he said.

Despite the improved economic forecast, the IMF estimated cumulative overall fiscal deficits in the region to be $294 billion in 2018-22.

Around $71 billion of government debt is expected to mature during the same period.

"The rapid buildup of debt in many of them (MENA countries) is a cause for concern. Debt has increased by an average of 10 percentage points of GDP each year since 2013, with countries financing large fiscal deficits," the IMF report said.

An impending increase in interest rates, making borrowing more expensive, will complicate the problem, it added.

According to the IMF, the economy of should grow by 6.2 percent annually to maintain unemployment at the current rate of 10 percent.

MENA countries need to create 25 million new jobs over the next five years, Azour said, while warning of the negative consequences of unemployment coupled with rising debt levels.

"The average debt in the region for exceeds 80 percent," of (GDP), he said, stressing such a figure is "beyond what is acceptable.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 02 2018. 11:55 IST