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International Monetary Fund. Middle East and Central Asia Dept.

Abstract

The MENAP oil exporters were directly affected by the global financial crisis through a sharp drop in oil prices, a contraction in the global economy, and a sudden drying up of capital inflows. Although activity in the oil sector will likely drop by 3.5 percent in 2009, strong countercyclical macroeconomic policies have helped mitigate the impact of the crisis on the non-oil sector, which is projected to grow by 3.2 percent. Looking ahead, higher oil prices, a revival of global demand, and continued government spending will provide the basis for stronger growth in 2010. The crisis also revealed some vulnerabilities in the banking and corporate sectors, requiring countries to undertake exceptional stabilization measures and highlighting the need to strengthen financial sector supervision, enhance corporate governance, foster resource mobilization, and diversify risks.

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

The MENAP oil importers are a diverse group, encompassing both emerging and low-income economies. Many have seen significant slowdowns in the past year but, overall, these countries have escaped the substantial contractions experienced in other parts of the world. Supportive policy responses, a low degree of integration with international capital markets and manufacturing supply chains, and banking systems that had little exposure to structured financial products have contained the fallout. While the slowdown has been modest, this group of countries is also likely to experience a slow recovery. Limited external financing, little space for fiscal stimulus, a real appreciation of most domestic currencies, sluggish receipts from tourism and remittances, and higher energy prices will all continue to be a drag on growth for some time.

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

For many countries in the Caucasus and Central Asia (CCA) region, the impact of the global economic downturn has been severe, but prospects for energy importers and exporters differ starkly. For energy importers, the economic outlook remains challenging and recovery in 2010 is likely to be gradual, primarily because of their linkages with Russia. In particular, remittances have fallen sharply, hurting low-income households. Fiscal policy should remain accommodative in 2010 to support growth and mitigate the impact on the poor, but continued concessional donor support will be needed to prevent a buildup of unsustainable debt levels.

Ms. May Y Khamis, Mr. Abdelhak S Senhadji, Mr. Gabriel Sensenbrenner, Mr. Francis Y Kumah, Maher Hasan, and Mr. Ananthakrishnan Prasad
This paper focuses on impact of the global financial crisis on the Gulf Cooperation Council (GCC) Countries and challenges ahead. The oil price boom led to large fiscal and external balance surpluses in the GCC countries. However, it also generated domestic imbalances that began to unravel with the onset of the global credit squeeze. As the global deleveraging process took hold, and oil prices and production fell, the GCC’s external and fiscal surpluses declined markedly, stock and real estate markets plunged, credit default swap spreads on sovereign debt widened, and external funding for the financial and corporate sectors tightened. In order to offset the shocks brought on by the crisis, governments—buttressed by strong international reserve positions—maintained high levels of spending and introduced exceptional financial measures, including capital and liquidity injections. The immediate priority is to complete the clean-up of bank balance sheets and the restructuring of the nonbanking sector in some countries. Clear communication by the authorities would help implementation, ease investor uncertainty, and reduce speculation and market volatility.
Mohsin S. Khan and and Mr. Abbas Mirakhor

This paper examines the trade and pricing policies in world agriculture. In the United States, the government pays farmers not to grow cereals and in the European Community, farmers are paid to grow more. Many have raised nominal producer prices but followed macroeconomic and exchange rate policies that left real producer prices unchanged or lower than before. Many have set up complex systems of producer taxation, and then established equally complex and frequently ineffectual systems of subsidies for inputs to offset that taxation.

International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper discusses the designing and implementing of Kuwait’s fiscal policy for the medium term. Fiscal policy has a major role to play in supporting macrostability and diversification. The fiscal strategy design and implementation on a yearly basis are based on a few key areas such as determining targets or ceilings for major fiscal parameters for a three-year rolling framework with binding next budget year and indicative two outer years, establishing a clear process for expressing policy objectives and their link to expenditure, etc. The illustrative budget sequencing with the fiscal strategy spearheading medium-term fiscal policymaking and linked to the annual budget process would support fiscal policy implementation.
International Monetary Fund. Middle East and Central Asia Dept.
This paper presents country experiences with reforms to strengthen regulatory oversight of the Islamic banking sector. Based on the selected country experiences, a number of important lessons and policy options can be drawn that have implications for the stable and sound development of Islamic banking. An enabling regulatory and institutional framework and a level playing field for conventional and Islamic banks is critical for the sound and stable growth of the Islamic banking industry. The country experiences also underscore the importance of providing an enabling framework while letting market forces determine the size of the industry.
International Monetary Fund
This Financial System Stability Assessment on the United Arab Emirates (UAE) examines macroeconomic and financial sector developments. The banking sector as a whole shows comfortable levels of capitalization and profits, having benefited from the rapid expansion of the economy and a steady decline in the ratio of nonperforming loans (NPLs) to total loans. Although mortgages still account for a relatively small part of bank loan portfolios, the indirect exposure could be significant. Some financial institutions’ lending standards also may be weakening as they compete for new business in mortgage lending.