On Saturday, the 9th of February, the Chief of International Monetary Fund, Christine Lagarde said that the oil exporters are not fully recovered from the dramatic oil price shock of 2014, alongside, she also cautioned against spending big money on “White Elephant Projects”.
Apart from the uncertainty in the growth outlook for oil exporting countries, the IMF’s Lagarde said in a conference in Dubai ahead of a World Government Summit scheduled on Sunday (February 10th), “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.
This has led to a sharp increase in public debt, from 13 percent of GDP in 2013 to 33 percent in 2018. ” Concomitantly, the Chief of International Monetary Fund had also commented that a looming uncertainty over oil exporting markets had shifted many countries towards renewable energy over the past few decades.
Besides, Lagarde also cautioned the investors of large “White Elephant Projects”, seemingly indicating investments like $500 billion Saudi project, NEOM, announced by Saudi Crown Prince Mohammed Bin Salman and would be funded by state owned wealth funds, bypassing conventional budgets.
Addressing to the middle east’s oil-dependent economy, she cautioned the investors about an upcoming wobble in oil price, which might push forth a market flip-flop, thereby disrupting the larger investments through state-owned wealth funds bypassing the normal budget project.
She also said that the oil exporters of the Gulf countries could follow the examples of other resource-rich countries like Norway and Chile, which had been using fiscal rules for protecting priorities such as social spending, instead investing nation’s fund despite intense volatilities in the commodity price.