DOHA: International Monetary Fund (IMF) Managing Director Christine Lagarde (center) poses for a group photograph with finance ministers during the the Gulf Cooperation Council (GCC) finance ministers meeting held in Doha yesterday. —AP DOHA: International Monetary Fund (IMF) Managing Director Christine Lagarde (center) poses for a group photograph with finance ministers during the the Gulf Cooperation Council (GCC) finance ministers
meeting held in Doha yesterday. —AP

DOHA: International Monetary Fund chief Christine Lagarde warned yesterday that global energy prices could remain low for years and urged Gulf countries to adjust their budgets. Speaking in Qatar's capital Doha after meeting ministers and officials from the six-nation Gulf Cooperation Council (GCC), Lagarde warned that the countries could no longer rely on revenues from oil and gas.

"We believe that the price of oil will probably persist at the level where it is for a number of years and as a result all GCC countries should undertake some degree of fiscal adjustment," she said at a press conference. She said the IMF believed growth across GCC countries would fall from 3.2 percent this year to 2.7 percent in 2016.

Lagarde said all the GCC countries needed to adjust their budgets further to cope with low oil prices in the longer term, and that most had introduced fiscal policies which would allow them to make those adjustments from a position of strength, limiting the impact on their economic growth rates.

Lagarde also said that export revenues would be $275 billion (256 billion euros) lower this year than in 2014 because of low energy prices. The price of oil has dropped by more than half since the beginning of 2014, with Brent crude, the international benchmark, trading Friday at $47.42 per barrel for December.

Lagarde said adjustments should include "firm control" on spending, particularly on public sector wages, and encouraging private sector growth. "Well-planned fiscal consolidation strategies need to be put in place as soon as possible and communicated so that people understand how the adjustment will take place," she said.

She said the "size and urgency of this adjustment" varied for countries across the GCC.

Fiscal policies

Most of the six oil exporting nations in the Gulf Cooperation Council have put in place prudent fiscal policies, and those that haven't can learn from those that have, Lagarde said. Lagarde made the remarks in a statement after a meeting with senior GCC economic officials in Doha. The plunge of oil and gas prices since last year has slashed governments' energy revenues, saddling most with big deficits.

"Those who have not done it can certainly learn from those who have," she said without naming individual countries.

She also urged GCC countries, including Saudi Arabia and the United Arab Emirates, to introduce a regional value-added tax as soon as possible, since even at a low rate it could raise considerable revenues. That reform should not be delayed, she said.

Lagarde said governments needed to cut the growth of their current spending. "Given the new fiscal realities, there is not room for public wage bills to grow further. We have to face that reality."

Qatari Emir Sheikh Tamim bin Hamad Al-Thani met visiting Managing Director of the IMF Christine Lagarde, and discussed bilateral relations, said the Qatar News Agency (QNA) yesterday. The meeting dealt with issues of common interest and ways to boost cooperation between the IMF and Qatar, it added.

During her visit, the IMF Managing Director is expected to participate in the joint meeting of the financial and economic cooperation committee of the Gulf Cooperation Council (GCC) and the committee for governors of (GCC) central banks and monetary institutions which will be hosted in Doha later in the day, the agency said. -Agencies