IMF chief urged Arab countries to slash public wages and subsidies

Vastavam web: IMF chief Christine Lagarde today urged Arab countries to slash public wages and subsidies in order to rein in spending, achieve sustainable growth and create jobs.Speaking at the one-day Arab Fiscal Forum in Dubai, Lagarde welcomed “promising” reforms adopted by some Arab countries, but insisted much more was needed to overcome daunting economic and social problems.Almost all Arab countries have posted budget deficits over the past few years and Arab economies grew at just 1.9 per cent last year, half the global rate, according to the Arab Monetary Fund (AMF), which co-organised the event with the IMF.

Yet Arab public spending remains very high, especially in oil-rich Gulf states, where government expenditures exceed 55 per cent of gross domestic product, Lagarde said.She said many Arab governments had taken steps to contain spending, but the measures have often been temporary.”There is really no excuse for the continued use of energy subsidies,” Lagarde said.

“They are extremely costly averaging 4.5 per cent of GDP among oil exporters and three per cent of GDP among oil importers.” All six members of the Gulf Cooperation Council and many other Arab countries have reduced energy subsidies in recent years, but their cost is still high.”Youth unemployment is the highest in the world — averaging 25 per cent, and exceeding 30 per cent in nine countries,” she said. “Moreover, over 27 million hopeful young people will join the workplace over the next five years.”