The Future of Oil and Fiscal Sustainability in the GCC Region

Abstract

The oil market is undergoing fundamental change. New technologies are increasing the supply of oil from old and new sources, while rising concerns over the environment are seeing the world gradually moving away from oil. This spells a significant challenge for oil-exporting countries, including those of the Gulf Cooperation Council (GCC) who account for a fifth of the world’s oil production. The GCC countries have recognized the need to reduce their reliance on oil and are all implementing reforms to diversify their economies as well as fiscal and external revenues. Nevertheless, as global oil demand is expected to peak in the next two decades, the associated fiscal imperative could be both larger and more urgent than implied by the GCC countries’ existing plans.

Achieving sustainable development by enhancing the quality of institutions in Saudi Arabia

“…Yet, whenever the price of oil goes down, the Saudi economy faces budget deficits and the government seeks loans or liquidate some of the government assets to pay for current public expenditures. Mirzoev et al (2020) agree and argue that all Arab states in the Gulf (Gulf Cooperation Council; GCC), including Saudi Arabia, need to adopt fiscal and monetary reforms to diversify their economies and become less dependent on oil, yet these countries have not made the necessary and fundamental changes to reach fiscal stability. Thus, Mirzoev et al (2020) suggest that the GCC countries can only benefit from the wealth they have reserved over the years to build diversified economies by developing better budgetary processes.…”

“…Mirzoev et al (2020) agree and argue that all Arab states in the Gulf (Gulf Cooperation Council; GCC), including Saudi Arabia, need to adopt fiscal and monetary reforms to diversify their economies and become less dependent on oil, yet these countries have not made the necessary and fundamental changes to reach fiscal stability. Thus, Mirzoev et al (2020) suggest that the GCC countries can only benefit from the wealth they have reserved over the years to build diversified economies by developing better budgetary processes. Also, they think that controlling government expenses and applying more efficient methods in the budgetary process should be considered first if these countries are going to be stable fiscally.…”

“…Accordingly, long-term economic growth based on having a long-term plan is the best recipe. Moreover, Mirzoev et al note, ‘faster economic diversification will not resolve the fiscal challenge on its own: countries will also need to increase their non-oil fiscal revenue’ (Mirzoev et al, 2020: 30).…”

An Overview of Innovation in the Arab Gulf States: From Origins and Five‐Year Plans to New Cities and Indices

“…With its latest report, the International Monetary Fund (IMF) found that the dip in hydrocarbon revenues and state spending increases that occurred throughout the GCC from 2007 to 2014 generated deficits that have yet to be reversed. Unless this turns around, and oil receipts overtake state spending, the IMF estimates that by 2034 the Arab states of the Gulf will be broke (Mirzoev et al., 2020). This would end the dreamtimes.…”

Breaking Out of Fragility: A Country Economic Memorandum for Diversification and Growth in Iraq

“…9 9 5 1 . 0 0 -1 0 1 2 3 4 government expenditures (Mirzoev et al 2020). One part of this adjustment might be the establishment of fiscal rules, such as a ceiling on the current primary spending of the central government, which has been proposed by the International Monetary fund (IMf 2019a).…”