Christine Lagarde, managing director of the IMF, has repeated her recommendation for GCC countries to use fiscal adjustment to counter the impact of oil price volatility. The implementation of VAT in the region now looks inevitable.
Lagarde visited countries in the region during the first two weeks of November, advising that a dependence on oil revenue is unsustainable given pricing trends. She recognised that the nature of the fiscal adjustment required will vary from country-to-country, she noted the “main elements are common across countries”. An expansion of non-oil tax revenue was chief among such elements.
“At the moment, a large share of fiscal and export revenues in the GCC come from oil. With oil prices having declined sharply since mid-2014, export revenues are expected to be nearly $275 billion lower in 2015 than in 2014,” said Lagarde.
The Cooperation Council for the Arab States of the Gulf , originally (and still colloquially) known as the Gulf Cooperation Council (GCC), is a regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf, except for Iraq. Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.