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The International Monetary Fund has released a new report for countries in the Middle East and North Africa, noting that low growth rates and oil prices should encourage these territories to continue efforts to broaden their tax bases, including by introducing value-added taxes.
"The countries of the Middle East and North Africa region are still facing two of the world's most pressing economic and geopolitical issues: the slump in oil prices and the intensification of conflicts," said IMF Middle East and Central Asia Department Director Masood Ahmed at the report's launch in Dubai.
The report highlights the significant progress many countries had made over recent months in adjusting to this new economic environment, particularly in the area of spending and new revenues.
Some countries have started to find cost savings in their public wage bills. For example, Saudi Arabia recently announced a number of measures to trim its government wage bill, including by reducing allowances and limiting overtime. Gulf Cooperation Council countries are also planning the introduction of a value-added tax, it noted.
"Oil exporters are facing the difficult task of growing their economies in a climate of lower budget revenues and spending cuts," Ahmed said. "Therefore, the challenge now and into the future will be to find alternative sources of revenues and economic growth to maintain the level of prosperity many of them have become accustomed to."
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), said the reforms that the GCC countries have been implementing over the past year in response to the decline in oil prices are impressive. She said continued fiscal adjustment will be needed over the medium term. "Where possible, countries should phase in deficit-reduction measures gradually, while strengthening their medium-term fiscal frameworks and fiscal transparency to support the adjustment. Policies to support growth and employment will also need to continue."
"Over the past year, the IMF has further strengthened its relationship with the GCC countries through our regular country visits, our technical assistance, and our training program. The IMF stands ready to continue to support the GCC countries in addressing their challenge of adjusting to the lower oil price environment."
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