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IMF chief outlines steps for economic resilience in Arab countries

Kristalina Georgieva said these steps would be essential for survival of countries bearing the brunt of looming inflation.

IMF chief outlines steps for economic resilience in Arab countries
[Source photo: Anvita Gupta/Fast Company Middle East]

With economic uncertainties, high inflation and geopolitical conflicts, effective fiscal policies can build economic resilience. According to the IMF outlook, growth is expected to drop in the MENA economies from 5.4% in 2022 to 3.2% this year before ticking up to 3.5% in 2024. 

Kristalina Georgieva, the IMF Managing Director, speaking at the Arab Fiscal Forum at the World Government Summit in Dubai, outlined three principles to build resilience. First, establishing a robust framework for fiscal policy and risk management. Second, long-term planning and investment to tackle climate change. Third, boosting tax revenues and modernizing tax administration.

Examples of countries implementing these principles were provided, such as Morocco phasing out broad-based subsidies for targeted social support, Mauritania setting a fiscal anchor to manage mineral export revenue, and energy exporters building buffers to prepare for oil price volatility. 

“Many governments have stepped in to help the vulnerable in the face of increasing energy and food prices in the region while still maintaining development plans and investment, and this is an act that requires resources and careful planning,” Georgieva said.

To address climate change, Georgieva stressed the importance of investing in climate-resilient infrastructure and early warning systems and shifting to renewable energy. 

To increase tax revenues, the IMF chief encouraged improving tax policy design, phasing out inefficient exemptions, and modernizing tax administration. The UAE plans to introduce the corporate tax in June, Bahrain and Saudi Arabia raised significant revenue through value-added taxes.

“If we are to invest in a more resilient future, we will need to strengthen tax policy and administration further. Many countries in the region have made good progress in expanding their tax capacity. And yet, the average tax-to-GDP ratio, excluding hydrocarbon-related revenue, remains at about 11%— less than half of what could potentially be collected,” she said.

“This can be increased by improving tax policy design and phasing out inefficient tax exemptions,” she added.

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