Dubai: Public spending in the UAE should be scaled back in the face of risks that oil prices will fall on weak growth prospects in advanced economies, the International Monetary Fund (IMF) said on Thursday.
"The current uncertain global economic and financial environment poses a number of risks. The weak growth prospects in the advanced economies could lead to a pronounced decline in oil prices if regional geopolitical risks subside," it said.
"The large increases in public expenditure that took place in response to the 2009 crisis should now be unwound as they expose the UAE to the risk of falling oil prices."
The statement was issued after a meeting between an IMF mission led by Harald Finger and UAE officials. The IMF praised the fiscal policies, calling them ‘appropriate' but said that worsening global financial conditions could threaten efforts by a number of state-owned entities to roll over maturing debt.
"Substantial progress has been made in the debt restructuring of government-related entities (GRE), but several troubled GREs are still in the process of restructuring. Moreover, the GREs are still faced with high refinancing needs and continued reliance on foreign funding."
The IMF called for more disclosure about the finances and status of these companies in order to better attract funding and reassure investors.
"Improved transparency and communication would support the market refinancing of GRE debt. Looking ahead, the authorities should continue to improve regulation, oversight and governance to manage the remaining GRE risks," it said.
