IMF chief calls for reforms in Gulf amid low oil prices

On a trip through a Gulf squeezed by low oil prices, the head of the International Monetary Fund repeatedly called on countries to cut back on subsidies, lower government spending and consider levying taxes. But implementing Christine Lagarde's suggestions is easier said than done in the oil-rich countries, even as crude prices have dropped by over 50 percent since last year. Generations have grown used to cradle-to-grave social programs, comfortable government jobs and tax-free living. While Gulf leaders, including those in Kuwait, have begun warning harder times may be ahead, some citizens remain opposed to any cuts.
"Almost every week we hear about Kuwait giving grants left, right and center to other nations that are in need of money. It's as if the government doesn't realize that we, in Kuwait, are also in need," said Abdulaziz Al-Adwani, a Kuwaiti school teacher. "It's not logical to start imposing a tax on citizens when the government can afford to give grants to this country and that country."
That's the kind of opposition Lagarde, the IMF's managing director, and Gulf leaders face in moving forward with any structural reforms. Countries like the United Arab Emirates, Qatar and Kuwait have large cash reserves to cushion the blow of low prices. However, if depressed prices continue into next year and beyond as analysts predict, even oil powerhouse Saudi Arabia could find itself hurting.
After meeting finance ministers of the Gulf Cooperation Council in Qatar on Sunday, Lagarde offered her own recommendations on how to move forward. The council includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.