The International Monetary Fund (IMF) recently announced that phasing out explicit energy subsidies in the Middle East could result in significant cost savings of $336 billion. This is equivalent to the entire economies of Iraq and Libya combined, according to Kristalina Georgieva, managing director of the IMF.
During a speech at the World Government Summit in Dubai, Georgieva expressed confidence in the global economic outlook despite uncertainties related to war and geopolitics. She also warned of the wide-ranging consequences of the conflict in Gaza and its potential to further exacerbate economic challenges faced by economies still recovering from previous shocks.
In addition to substantial cost savings, eliminating regressive energy subsidies would also discourage pollution and help improve social spending. However, Georgieva noted that this could only be done with careful planning and coordination between governments and international organizations such as the IMF.
The recent revision of the GDP growth forecast for the Middle East and North Africa region downward to 2.9% this year is partly due to short-term oil production cuts. Georgieva emphasized that despite these challenges, it is important for countries in this region to focus on diversifying their economies and investing in infrastructure projects that can create new job opportunities for their citizens.
Overall, Georgieva expressed optimism about the future of the global economy but called for more concerted efforts from governments around the world to address pressing issues such as poverty alleviation, climate change, and geopolitical instability.