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IMF Lagarde says oil exporters have not fully recovered from oil shock, cautions against 'white elephant projects'

Reuters  |  DUBAI 

By Lisa and Barbuscia

(Reuters) - have not fully recovered from the of 2014, the of the IMF said on Saturday, and she cautioned against spending money on "white elephant projects".

"With revenues down, fiscal deficits are only slowly declining, despite significant reforms on both the spending and revenue sides, including the introduction of VAT and excise taxes," Christine Lagarde, the of the IMF, told a conference in

"This has led to a sharp increase in public debt, from 13 percent of GDP in 2013 to 33 percent in 2018."

Lagarde said the uncertainty in the growth outlook for also reflected moves by countries to shift rapidly toward over the new few decades, in line with the climate change pact.

She said there was scope to improve fiscal frameworks in the with some of the weaknesses emanating from "short-termism and insufficient credibility".

Lagarde said governments in the region might be tempted to favour white elephant projects instead of investment in people and productive potential.

Saudi Arabia, the Middle East's biggest economy, has announced plans to go ahead with three major projects including NEOM, a $500 billion economic zone announced by

The projects are backed by the country's sovereign wealth fund,

Lagarde also said across the region, it is common for sovereign wealth funds to directly finance projects, bypassing the normal budget process, while state-owned enterprises in some countries had high levels of borrowing, outside the budget.

She said could follow the example of other resource-rich countries such as and in using fiscal rules to protect priorities, such as social spending, from commodity price volatility.

Among in the region, growth had picked up, but it was still below the level before the global financial crisis, she said.

Fiscal deficits remained high, and public debt had risen rapidly - from 64 percent of GDP in 2008 to 85 percent a decade later, she said. Public debt now exceeded 90 percent of GDP in nearly half of these countries.

Speaking about the global economy, Lagarde said the IMF was not seeing a global recession on the horizon, but risks were rising for global growth due to trade tensions and tightening financial conditions.

The IMF's revised forecast sees the global economy growing by 3.5 percent this year, 0.2 percentage points below what it expected in October.

"Unsurprisingly, a weaker global environment has knock-on effects on the region through a variety of channels - trade, remittances, capital flows, commodity prices, and financing conditions," she said.

(additional reporting by Asma Alsharif; Writing by Saeed Azhar; Editing by Robert Birsel)

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

First Published: Sat, February 09 2019. 12:30 IST