The IMF invites sovereign wealth funds in the Middle East to support their economies
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Economy News _ Baghdad
An International Monetary Fund official said on Monday that sovereign wealth funds in the Middle East must be used to support growth, as the region's economies are suffering from the Corona virus pandemic and severe damage caused by the fall in oil prices.
According to the International Monetary Fund, oil exporters in the Middle East and North Africa are expected to see a decline in oil export revenues this year of $ 226 billion.
This will likely pressure their budgets, which increases the budget deficit and potentially limit the ability of governments to support economic growth.
For Gulf oil exporters, this is a dilemma, as government spending is a major driver of the economic transformation plans that were launched over the past few years to diversify their economies away from oil.
Jihad Azour, director of the Middle East and Central Asia Department of the International Monetary Fund, said that oil exporters need to find new areas for growth in light of the current slowdown caused by the sharp drop in oil prices and the outbreak of the new Corona virus.
"Sovereign wealth funds can play a role and regional institutions can play a role," he told an online conference.
Oil prices have tumbled this year, as demand has been hit hard by public isolation measures around the world aimed at containing the pandemic.
The Institute of International Finance estimates that the sovereign wealth funds of oil-rich governments like Abu Dhabi, Kuwait, Saudi Arabia and Qatar are among the largest in the world, but they may see their assets decrease by $ 296 billion by the end of the year.
Azour said that oil exporters in the Middle East and North Africa are likely to witness a contraction of 4.2 percent in real GDP this year, down from previous expectations for growth of 2.1 percent.
He called for accelerating reforms aimed at diversifying the economies of the region.
"There are numbers of prohibitions that have lived with us for some time, including that oil-exporting economies, for example, have to go through cycles, and this is something we can break ... or that the tools cannot be redirected and that sovereign wealth funds cannot be redirected to help the economy To grow. ”
The International Monetary Fund said that 12 countries in the region - Bahrain, Iran, Morocco, Saudi Arabia, the UAE, Tunisia, Kuwait, Libya, Mauritania, Sudan and Iraq - provided financial support worth $ 64 billion in response to the pandemic, which equates to an average of 2.7 percent of GDP.
Central banks in Bahrain, Qatar, the United Arab Emirates, Morocco, Jordan, Saudi Arabia and Tunisia collectively provided support through an additional 47 billion in liquidity.