DUBAI: IMF chief Christine Lagarde on Saturday 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.
Low oil prices are weighing on the finances of Arab oil exporters, while importers are battling with rising debt, unemployment, conflicts, terrorism and refugee inflows, the International Monetary Fund’s managing director said.
Almost all Arab countries have posted budget deficits over the past few years and Arab economies grew at just 1.9 percent last year, half the global rate, according to the Arab Monetary Fund (AMF), which co-organized the event with the IMF.
Yet Arab public spending remains very high, especially in oil-rich Gulf states, where government expenditures exceed 55 percent of gross domestic product, Lagarde said.
She said many Arab governments had taken steps to contain spending, but the measures have often been temporary.
Public spending reforms should focus on cutting costly subsidies and public wage bills whilst boosting efficiency in areas like health, education and public investment, she said.
“There is really no excuse for the continued use of energy subsidies,” Lagarde said.
“They are extremely costly — averaging 4.5 percent of GDP among oil exporters and three percent 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.
AMF chairman Abdulrahman Al-Hamidy said the value of Arab energy subsidies dropped from $117 billion in 2015 to $98 billion last year, according to a study by his organization.
Lagarde warned that higher growth and stringent reforms were needed to create jobs for young Arabs.
“Youth unemployment is the highest in the world — averaging 25 percent, and exceeding 30 percent in nine countries,” she said. “Moreover, over 27 million hopeful young people will join the workplace over the next five years.”
Hamidy said Arab economies must grow at 5-6 percent annually to create the necessary jobs, adding that half of the Arab world’s estimated 400 million population is under 25 years old.
IMF chief urges Arab states to slash spending
IMF chief urges Arab states to slash spending
Gulf emerging as beneficiary amid changing global alliances, says TCW executive
DAVOS: As artificial intelligence dominated discussions at this year’s World Economic Forum in Davos, asset managers are exploring how the technology can be deployed at scale without losing the human judgement that underpins investment decisions.
For Jennifer Grancio, global head of distribution at asset management firm TCW, Saudi Arabia’s approach to energy and AI makes it a particularly attractive hub for investors.
“Saudi Arabia has been very forward-leaning in traditional energy,” Grancio said.
“They’ve also invested heavily in grid efficiency and electricity, which positions them to serve the wider region. Combined with AI adoption, it makes them a powerhouse for investment opportunities.”
For TCW, the focus is not on replacing human expertise but on expanding capacity.
“We’re using AI to increase capacity, not to replace investment analysts or people who write commentaries or evaluate securities,” Grancio explained.
The firm continues to rely on deep research, deploying AI selectively across functions such as securitized credit, marketing and investment teams.
TCW’s engagement with AI predates the current wave of enthusiasm and adoption.
“We were actually an early AI investor. In the US, we have the oldest AI fund, launched over eight years ago, focused on both enablers and adopters,” Grancio said.
The dual focus on technology and infrastructure increasingly aligns with developments in the Gulf.
“As an investment manager, we look at both the AI systems being developed and how energy and power infrastructure supports them,” she said, highlighting TCW’s global energy and power strategy, which has consistently outperformed its benchmark.
Geopolitical shifts are also reshaping investment flows to the Gulf.
“Concerns around the US, China or Russia have led global investors to rely more on the Gulf,” Grancio said. “It’s a great time for development and trade there.”
Emerging markets are drawing growing attention from investors.
“In the US, there’s a rotation toward global exposure. Elsewhere, there’s renewed focus on emerging markets and managing through volatility,” she said.
TCW has benefited from this trend, particularly in emerging market debt, with sovereign clients increasing allocations by billions of dollars.
Volatility, Grancio added, can create opportunity. “As a value manager, we do deep research and focus on relative valuation. In fixed income and securitized credit, volatility allows us to increase returns for clients.”
In the Middle East, sovereign wealth funds and pension systems are expanding into private credit and alternative income strategies. Education is key, Grancio said.
“Understanding what’s different about private investments is critical. They offer strong compounding and portfolio diversification.”
Private asset-backed finance is a growing trend in the region. “We’re seeing portfolios shift from public fixed income into private securitized credit, a major growth area.”
Looking ahead to 2026, Grancio said that shifts will vary by region and investor type. “In the US, the wealth market has moved toward ETFs. We’ve rapidly built out a $6 billion ETF platform to meet demand,” she said.
