Middle Eastern oil exporters face a combined $1 trillion budget shortfall in the next five years if crude prices stay at present lows and economic reforms aren’t introduced more rapidly, an International Monetary Fund official said.
Countries such as Saudi Arabia and Kuwait are coping with the impact of falling oil prices CLZ5, -1.88% by drawing down some of the vast reserves they built up in recent years thanks to high oil prices. They’ve also started borrowing more, though spending on large infrastructure projects and social handouts hasn’t significantly come down yet.
Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, says these oil-rich countries for now have the capacity to borrow more from the markets, but time is running out because most countries in the region will have burned through their reserves within five years.
“It has to be accompanied by a plan to find a better balance between expenditures and income in the medium term,” Ahmed told The Wall Street Journal.