IMF, US Treasury chiefs visit Gulf amid oil worries

Both IMF Managing Director Christine Lagarde and Treasury Secretary Jacob Lew travelled to Saudi Arabia to speak to the kingdom’s rulers, as well as other officials of the Gulf Cooperation Council [GCC].

Oil prices, which peaked above $100 a barrel in mid-2014, have been halved since and now trade under $50. That has forced countries in the region to abandon or slow construction projects, cut salaries and benefits and combine government ventures.

Saudi Arabia, for instance, has cut public subsidies, reduced ministerial salaries and launched an ambitious plan to wean its economy away from oil within a matter of decades.

On Wednesday, Lagarde said more needs to be done in Gulf countries, including lifting expensive government subsidies on fuel and starting a region-wide value-added tax. While every country in the region has cut back some on fuel subsidies, Lagarde warned that prices remain too artificially low. The region-wide value-added tax also likely remains years away from being implemented.

"The reforms that the GCC countries have been implementing over the past year in response to the decline in oil prices are impressive,” Lagarde said in prepared remarks.

"Continued fiscal adjustment will be needed over the medium term," she added.

Lew on Thursday said the challenges provide an opportunity for the GCC "to diversify its economy, expand opportunities for your people and widen the financial base in order to make available additional resources to meet growing development needs."

Lew also applauded efforts by Gulf countries to cut funding to militant groups.