IMF lauds UAE for fiscal adjustments amid weak oil environment

The IMF has commended the UAE over the past years to “strengthen its medium-term frameworks for fiscal policymaking and risk analysis.” (Reuters)
Updated 17 July 2017
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IMF lauds UAE for fiscal adjustments amid weak oil environment

DUBAI: The UAE has been successfully making inroads adjusting fiscal policies to cope with the global weakness in oil prices, an International Monetary Fund study has affirmed.
The study, published by the IMF on its website, commended the progress made by the UAE over the past years to “strengthen its medium-term frameworks for fiscal policymaking and risk analysis.”
“Over the past years, local and federal governments have made progress in strengthening their medium-term frameworks for fiscal policymaking and risk analysis,” the fund said.
The fund particularly noted the spending program of the country’s two biggest emirates, Abu Dhabi and Dubai, which were associated with performance indicators.
“Abu Dhabi produces an internal medium-term fiscal outlook based on realistic oil price assumptions, which orientates its annual budget process. Dubai has a medium-term fiscal framework with three-year budget targets,” the fund said, which were broadly in line with global and regional trends.
The study was published as part of the IMF’s series of country reports, aimed at helping countries better align resource allocation with local and national developments plans under a consolidated Medium-Term Fiscal Framework (MTFF).
The IMF said that the drop in oil prices has highlighted the need to further strengthen the UAE’s medium-term fiscal frameworks.
“The importance of economic diversification has increased with the decline in oil prices. It has become more crucial to align fiscal spending with the goals embodied in the 2021 National Agenda and emirates’ agendas,” it said.
On Abu Dhabi, the fund suggested that long-term fiscal policy goals should be centered on intergenerational equity, which can be achieved by gradually reducing government spending or raising non-oil revenue while maintaining priority spending.
“As the non-oil economy increases, and the country becomes more independent from oil short-term vulnerabilities, a move toward structural balances should be appropriate. This would allow the government to make a policy choice regarding which rule is most appropriate, depending on investment spending needs and their projected medium-term impact on non-oil growth,” the IMF said.


Mozambique’s gas-fueled future threatened by militants

Updated 24 June 2018
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Mozambique’s gas-fueled future threatened by militants

  • An unprecedented wave of militant attacks in northern Mozambique has raised fears the country will fail to fully cash in on a gas bonanza
  • Since October, more than 30 people have been killed in brazen assaults on unarmed villagers

MAPUTO: An unprecedented wave of militant attacks in northern Mozambique has raised fears the country will fail to fully cash in on a gas bonanza.
After 180 trillion cubic feet (5.1 trillion cubic meters) of natural gas were discovered off the country’s northeastern shore, Mozambique entertained dreams of following Qatar down the path toward wealth. The government even predicted that by 2035, the country’s GDP per head could increase sevenfold.
But the southeast African country’s golden vision has been thrown into doubt by an explosion of bloodthirsty assaults by a shadowy militant group in the region where the industry plans to base its hub.
Since October, more than 30 people have been killed in brazen assaults on unarmed villagers.
Security forces have rushed reinforcements to be area yet seem powerless to stem the attacks. Terrorized, many civilians have fled their homes and a cloud hangs over the great expansion plans.
US oil and gas giant Anadarko, the largest exploration company in the region, has invested $4 billion (3.4 billion euros) so far — it plans to put in $20 billion over the lifetime of the gasfields.
But following a US embassy alert on June 8 that warned of an imminent attack on the regional gas hub Palma, Anadarko temporary suspended some activities and moved affected workers and contractors to a secure site.
Canada’s Wentworth Resources has already suffered delays to its projects as a result of the insecurity, forcing it to seek a year-long extension for its initial exploration.
In its successful application to the authorities, Wentworth said the attacks had “prevented safe access to the area for Wentworth staff and contractors.”
There have been more than 10 attacks on villages since October, featuring beheadings and arson. None has targeted gas operations.
“Due to the attacks, we took additional measures to protect not only the oil and gas companies operating in that area, but also to protect the communities,” said Joaquim Sive, the police commander in Cabo Delgado.
Eric Morier-Genoud, a researcher at Queen’s University Belfast, said any attack against the gas “majors” would be an “escalation from which the militants would come out the losers.”
“At this point... based on the information we have, we classify the attacks as an insignificant risk to the economy,” Rogerio Zandamela, the governor of Mozambique’s central bank, told AFP.
In contrast to this, the central bank did consider a spate of attacks carried out by a militia loyal to the main opposition Renamo party in the country’s center in 2015 and 2016 as an economic risk.
“There was much more clarity about the conflict in central Mozambique... We cannot equate the north with the south,” Zandamela said. “The information available on the conflict in Cabo Delgado is very limited.”
Police have stepped up security around gas projects — particularly those close to areas that have come under attack, national police spokesman Inacio Dina told AFP.
An official at Anadarko, who declined to be named, said “There have been no threats specific to our project. However, it is a cause for concern, and therefore, as operations continue, we have undertaken appropriate measures.”
The company has a gas operations camp in a forest on the Afungi Peninsula.
Police and army units have established a command post in the forest following the attacks.
But a source at Anadarko told AFP that the firm has also stepped up its own security efforts, increasing its private protection force by two-thirds — a move that will have an impact on costs.
Despite such problems, foreign investors for now still have a big appetite for a share of Mozambique’s gas treasures.
Japan’s Tokyo Gas and Britain’s Centrica inked supply deals with Anadarko on June 15 — just a day after a machete attack on the village of Ibu.
Even so, experts say the instability in the northeast could still prove costly. It could cut into the dividend that Mozambique expects from the huge find.
“(The gas projects) are at risk in their early stages, as attacks can adversely affect logistics. Materials must reach Palma by land,” said Maputo-based political science researcher Joao Pereira.
“The insurgency is most likely to delay rather than derail development of the sector,” said Ed Hobey-Hamsher, an analyst at global risk consultancy Verisk Maplecroft.
“Attacks will certainly make the investment more expensive because of security needs reducing revenues for the state.”