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
Closing Bell: Saudi main market closes the week in red at 10,526
RIYADH: Saudi equities ended Thursday’s session modestly lower, with the Tadawul All Share Index slipping 14.63 points, or 0.14 percent, to close at 10,526.09.
The MSCI Tadawul 30 Index also declined 3.66 points, or 0.26 percent, to 1,389.66. In contrast, the parallel market outperformed, as Nomu jumped 237.72 points, or 1.02 percent, to close at 23,430.93.
Market breadth on the main market remained tilted to the downside, with 156 stocks ending lower against 99 gainers.
Trading activity eased further, with volumes reaching 80.46 million shares and total traded value amounting to SR1.66 billion ($442 million).
On the movers’ board, Saudi Industrial Export Co. led the gainers, rising 6.6 percent to SR2.10, followed by Consolidated Grunenfelder Saady Holding Co., which advanced 6.43 percent to SR9.60.
Raoom Trading Co. climbed 4.36 percent to SR61.05, while Astra Industrial Group gained 4.35 percent to close at SR139. Riyadh Cables Group Co. added 3.77 percent to end the session at SR135.00.
On the downside, Methanol Chemicals Co. topped the losers’ list, falling 5.96 percent to SR7.41.
Flynas Co. retreated 5.43 percent to SR61.00, while Leejam Sports Co. dropped 5 percent to close at SR100.80.
Alramz Real Estate Co. slipped 4.64 percent to SR55.50, and Almasane Alkobra Mining Co. declined 4.55 percent to SR84.00.
On the announcement front, ACWA Power said it has completed the financial close for the Ras Mohaisen First Water Desalination Co., a reverse osmosis desalination project with a capacity of up to 300,000 cubic meters per day, alongside associated potable water storage facilities totaling 600,000 cubic meters in Saudi Arabia’s Western Province.
The project was financed through a consortium of local and international banks, with total funding of SR2.07 billion and a tenor of up to 29.5 years, while ACWA Power holds an effective 45 percent equity stake.
Shares of ACWA Power ended the session at SR185.90, up SR0.2, or 0.11 percent.
Meanwhile, Consolidated Grunenfelder Saady Holding Co. announced the sign-off of a customized solutions project with Saudi Aramco Nabors Drilling Co., valued at SR166.0 million excluding VAT.
The 24-month contract covers the sale and maintenance of field camp facilities, with the financial impact expected to begin from the first quarter of 2026.
