"With revenues down, fiscal deficits are
only slowly declining, despite significant reforms on both the spending and
revenue sides, including the introduction of VAT and excise taxes,"
Christine Lagarde, told a conference in Dubai, CNBC reported.
"This has led to a sharp increase in
public debt, from 13% of GDP in 2013 to 33% in 2018."
Lagarde said uncertainty in the growth outlook
for oil exporters also reflected moves by countries to shift rapidly toward
renewable energy over the next few decades, in line with the Paris climate
change pact.
She said there was scope to improve fiscal
frameworks in the Middle East with some of the weaknesses emanating from
"short-termism and insufficient credibility."
Lagarde said governments in the region might be
tempted to favor white elephant projects instead of investment in people and
productive potential.
She said across the region, it is common for
sovereign wealth funds to directly finance projects, bypassing the normal
budget process, while state-owned enterprises in some countries had high levels
of borrowing, outside the budget.
She said oil exporters could follow the example
of other resource-rich countries such as Chile and Norway in using fiscal rules
to protect priorities, such as social spending, from commodity price
volatility.
Among oil importers in the Middle East region,
growth had picked up, but it was still below the level before the global
financial crisis, she said.
Speaking about the global economy, Lagarde said
the IMF was not seeing a global recession on the horizon, but risks were rising
for global growth due to trade tensions and tightening financial conditions.
The IMF's revised forecast sees the global
economy growing by 3.5% this year, 0.2%age points below what it expected in October.
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