Corruption is ‘key threat’ to Middle East economies, IMF chief warns

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Christine Lagarde, managing director of the International Monetary Fund, has warned that the economies of the Middle East face a challenging time. (File/AFP)
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Christine Lagarde, managing director of the International Monetary Fund, has warned that the economies of the Middle East face a challenging time. (File/AFP)
Updated 10 February 2019

Corruption is ‘key threat’ to Middle East economies, IMF chief warns

  • Hard-hitting analysis by IMF chief as leaders gather for World Government Summit
  • She was speaking at the Arab Fiscal Forum that traditionally precedes the World Government Summit

DUBAI: Corruption, poor governance and a lack of transparency are the key challenges facing Middle East economies, International Monetary Fund chief Christine Lagarde has warned in a hard-hitting analysis of the region’s economic prospects.

Speaking ahead of the opening day of the World Government Summit in Dubai, Lagarde also warned of the impact for regional economies if further measures to implement good governance practice and transparency were not put in place. 

The IMF is planning talks with regional policymakers to implement new frameworks to strengthen governance and tackle corruption, “the great disruptor of fiscal policy,” she added.

Her hard-hitting analysis of the region’s economic prospects come against the background of a weakening outlook for global economies. The IMF recently downgraded its forecasts for global growth.

“Unfortunately, the region has yet to fully recover from the global financial crisis and other big economic dislocations over the past decade,” she told regional finance ministers.

“Among oil importers, growth has picked up, but it is still below pre-crisis levels. Fiscal deficits remain high, and public debt has risen rapidly—from 64 percent of GDP in 2008 to 85 percent of GDP a decade later. Public debt now exceeds 90 percent of GDP in nearly half of these countries,” Lagarde said.

She went on: “The oil exporters have not fully recovered from the dramatic oil price shock of 2014. Modest growth continues, but the outlook is highly uncertain—reflecting in part the need for countries to shift rapidly toward renewable energy over the new few decades, in line with the Paris Agreement.

“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.”

The bottom line, the IMF boss said, is that "the economic path ahead for the region is challenging. This makes the task of fiscal policy that much harder, which in turn makes it even more important to build strong foundations to anchor fiscal policy.”

She said that there was scope to improve fiscal frameworks in the region, to offset the impact of short-termism and lack of fiscal credibility.

“I am referring to such factors as large amounts of spending kept off-budget and poor risk management. Across the region, it is common for sovereign wealth funds to directly finance projects, bypassing the normal budget process. And state-owned enterprises in some countries have high levels of borrowing—again, outside of the budget,” Lagarde said.

She commended Saudi Arabia and some other Middle East countries for setting up macro-fiscal units, but added: “Perhaps the oil exporters could follow the example of other resource-rich countries such as Chile and Norway in using fiscal rules to protect key priorities such as social spending from commodity price volatility,” she suggested.

Without such a framework, corruption - “a social poison” - becomes a greater risk. “Without trust in the fairness of the tax system, it becomes harder to raise the revenue needed for critical spending on health, education, and social protection. And governments might be tempted to favor white elephant projects instead of investments in people and productive potential. Add this up, and we have a recipe for unsustainable fiscal policy combined with social discord,” Lagarde added.

She was speaking at the Arab Fiscal Forum that traditionally precedes the World Government Summit, which formally opens Sunday for three days of high-level discussion and debate by world thought leaders from the worlds of public policy, business and entertainment.

Pakistan's Prime Minister Imran Khan, actor Harrison Ford and Lebanese Prime Minister Saad Hariri are among 4,000 delegates who will attend the three-day event, along with Estonia’s prime minister Jüri Ratas and President of Rwanda Paul Kagame.


Dubai launches economic program for post COVID-19 recovery 

Updated 05 August 2020

Dubai launches economic program for post COVID-19 recovery 

  • “The Great Economic Reset Programme” is part of a “COVID Exit initiative” to help the recovery and reshaping of the economy
  • The economic program will feature analyses of current and future policies

DUBAI: Dubai launched an economic program as part of its efforts to reshape the emirate’s economy for a “sustainable” and “resilient” future post the coronavirus pandemic, the government said. 
The Dubai government partnered with the Mohammed bin Rashid School of Government (MBRSG) to launch “The Great Economic Reset Programme” as part of a “COVID Exit initiative” to help the recovery and reshaping of the economy, state news agency WAM reported on Tuesday. 
The economic program will feature analyses of current and future policies, research and extensive stakeholder consultation to set the direction and tone of future economic policies, regulations and initiatives.
The government plans to use local and international experts for economies and societies to create growth strategies for the Dubai economy.
The MBRSG held a “Virtual Policy Council,” with global experts and thought leaders to discuss the impacts of COVID-19 on the economy and potential policy responses and initiatives. 
Chief economists, senior practitioners and researchers from leading global institutions including the World Bank, joined experts from Dubai Economy and the MBRSG at the first roundtable.
“I believe the triple helix collaboration between public, private and academia stakeholders have always produced the best solutions in the past. In the highly uncertain environment now, extensive collaboration and cooperation between all stakeholders are vital to our future prosperity. The Virtual Policy Council will propose the best approaches Dubai and the UAE can adopt to address the risks and opportunities in the next normal economy,” said Mohammed Shael Al-Saadi, CEO of the Corporate Strategic Affairs sector in Dubai Economy.
“This Virtual Policy Council is a key component of the whole process where global experts and thinkers share their views on the future economy. In this new era, the role of governments in enabling the new economic actors is becoming increasingly central, and Dubai is well-positioned to lead the way with innovative models of growth post COVID19,” said Professor Raed Awamleh, Dean of MBRSG.
The roundtable also discussed the impact of the pandemic on international trade, foreign investment and tourism, as well as the rise of digital globalization.