KUWIAT CITY: The IMF Middle East Center for Economics and Finance and the Arab Fund for Economic and Social Development held a symposium on the topic of fiscal reforms in Kuwait and the Arab world with the key aim of identifying the core ingredients of successful fiscal reform strategies in light of Arab countries’ specific institutional constraints. The sixth in a series of talks on, the event was took place Monday evening at the AFESD headquarters.
The panel discussion was moderated by the CEF’s Director, Oussama Kanaan, and included Stéphane Roudet, who leads the yearly IMF mission to appraise Kuwait’s economic situation, Eric Le Borgne, Practice Manager for the Middle East and North Africa in the Macroeconomics and Fiscal management Global Practice of the World Bank and Chadi Abdallah, economist and leading expert on subsidy reform in the International Monetary Fund’s Fiscal Affairs Department, and Mission Chief for the course on “Reforming Fuel Subsidies” delivered at the IMF’s Middle Center for Economics and Finance in Kuwait.
CEF Director Oussama Kanaan stated that the topic of fiscal reform has become increasingly important for a number of Arab countries, especially given rising pressures due to heightened conflict, a migration and refugee crisis, and, especially for GCC countries, low oil prices. A common challenge for most countries in the region has been the design and implementation of prudent fiscal policies with socially desirable patterns of public expenditures and efficient tax systems that are conducive to inclusive, equitable economic growth.
Le Borgne highlighted the recent developments, risks and major challenges facing the MENA region in his talk. In his overview, he touched upon the sharp slowdown in the GCC and weak growth on account of the oil stock, war and conflict spill-overs, slow recovery in key trading partners such as the EU, and fiscal retrenchment, but acknowledged green shoots of reform wherein fiscal consolidation had led to an improving fiscal outlook with measures such as the dismantling of energy subsidies along with other reform areas of taxation, civil service and public sector reforms, private sector development and improvements in the business environment, exchange rate and immigration reforms.
While he predicted a modest pick-up in growth, he urged that more needs to be done and pointed out that the MENA region lags behind other developing regions of the world in having rules-based policies. In oil exporting countries, a lack of rules-based fiscal frameworks has facilitated a direct transmission of volatility in commodity prices to the budget and slowed progress on the diversification agenda.
He identified short term risks as being excess volatility in oil prices, escalation of conflict and violence in the region and rising global uncertainty such as new US government policies and the implications of Brexit. For the long term risks and challenges, he highlighted conflict and proxy wars and political instability, the difficulty of maintaining political momentum for reforms, redefining the implicit social contracts that exist between governments and citizens as well as post-conflict reconstruction in conflict areas.
