The International Monetary Fund (IMF) revealed the Arab monarchies of the Persian Gulf face a budget reckoning and risk squandering $2 trillion in financial wealth within 15 years as oil demand nears peak levels.
The finances of the six-member Gulf Cooperation Council may have strain as global oil demand may start falling soon, said the IMF in a report on Thursday. The GCC accounts for a fifth of the world’s crude production.
The richest Middle Eastern states may lose their financial wealth by 2034 without decisive reforms as the region becomes a net debtor, the fund projects. The complete non-oil wealth would also be exhausted within another decade. The report was prepared by a team including the Middle East and Central Asia experts as well as the research department, said the IMF.
Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said in an interview, “Countries in the region need to think long-term and strategically because the oil market is changing structurally both from the demand and the supply side.”
He also emphasized on the need to accelerate the economic reforms that are already underway in some countries. According to Jihad Azour, arrangements needed to move job creation and spending from governments to the private business and develop more non-oil sources of income more quickly. He advised the GCC countries to become more active in their pursuit of an economic transformation to preserve their current wealth.
As per reports, global oil demand may reach the highest position around 2041 at about 115 million barrels a day and gradually decline from there. Saudi Arabia, the UAE, and Kuwait are the biggest producers in the GCC and are all OPEC members. However, Qatar, Oman, and Bahrain are not out of the risk. The IMF predicted that the improved energy efficiency or the imposition of a carbon tax by governments worldwide could bring oil’s demand peaks within the next ten years.