The organization's latest recommendations come as the
city-state of Dubai works itself out from more than $100 billion in debt
amassed by its Dubai World conglomerate and a web of other state-linked
companies, whose credit woes cast a shadow on economies across the region.
Firms elsewhere, including Saudi Arabia and Kuwait, are also struggling to
repay billions of dollars in debt.
Financial troubles among once seemingly solid companies
in the Gulf have spooked both lenders and borrowers, making risk-averse banks
reluctant to lend even as they struggle to attract new deposits, according to
the IMF.
That has left many relying on state support.
"The short-term priority remains the buttressing of
the financial sector without unduly constraining the availability of
credit," the IMF said in an update on the region released Wednesday.
It called on Gulf governments to periodically review
banks' books - which it says look healthy for now - and urged authorities to
spell out a framework for how and when they would intervene should problems
arise.
The IMF hailed the "significant progress" made
by struggling companies such as Dubai World and Kuwait's Global Investment
House to restructure their finances.
Dubai World, whose name became synonymous with the Gulf's
debt troubles, is expected to meet creditors this week as it seeks to win
support for its $23.5 billion restructuring plan.
But the IMF also said that as authorities work to fix
ailing firms, they should ensure "a smooth exit of nonviable
institutions" - some of which have been propped up by the region's
deep-pocketed governments.
"Countries should prepare an exit strategy from current
high spending levels, to ensure long-term fiscal sustainability," the IMF
said.
The fund expects Gulf economies to improve this year
thanks to the global recovery and generous state spending.
It forecasts regional oil output will rise by 4.8
percent, with economic growth outside the petroleum sector increasing by 4.3
percent.
As the Gulf pulls out of the downturn, it needs to boost
transparency and improve corporate oversight, the IMF said.
It also called on the six members the Gulf Cooperation
Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE - to address
"important gaps in quality and coverage" of financial and economic
data by releasing more of it more often.
Meanwhile, Kuwait's real GDP is expected to grow this
year after dropping 4.6 percent in 2009, the central bank governor said in
remarks published on Tuesday.
Sheikh Salem Abdul-Aziz Al-Sabah told the newspaper
an-Nahar that real GDP for 2009 was estimated to be 18.8 billion dinars ($64.83
billion), compared to 19.7 billion in 2008.
He said real GDP for the oil sector was expected to grow
by 1 percent in 2010, and the non-oil sectors by around 2.5 percent. The
governor did not provide figures or an overall percentage for this year.
Real oil sector GDP for 2009 was forecast to drop 11.4
percent to 7.1 billion dinars, and real nonoil sectors were forecast to record
"no significant growth" at 11.7 billion dinars, he said.
Demand for oil dropped in 2009 because of the slowdown in
the world economy after the economic crisis. Oil is the mainstay of Kuwait's
economy.
Inflation rate in the Gulf Arab state was expected to
stay at "relatively stable levels" of 4 percent for 2009, Sheikh
Salem told the daily.
Gulf states, which invest a large chunk of their foreign
exchange reserves in US assets, have no flexible monetary policy to control
inflation, which climbed to record, double-digit peaks in 2008.
Kuwait's central bank surprised the markets in February,
cutting its key interest rates by 25 to 50 basis points to support growth,
expecting inflation to stay low. The Gulf state's discount rate is currently at
2.5 percent.
