Arab Fiscal Forum highlights importance of ensuring financial sustainability
The Ministry of Finance (MoF) participated in the third Arab Fiscal Forum in Dubai, as part of its efforts to discuss, address and minimise the challenges faced by Arab economies in light of increasing pressures on public finances.
The forum, titled “Reforming Public Finance in the Arab States: Challenges and Opportunities,” was organised by the Arab Monetary Fund (AMF) in collaboration with the International Monetary Fund (IMF).
HE Obaid Humaid Al Tayer, Minister of State for Financial Affairs, inaugurated the forum and welcomed the participating delegations. HE highlighted that the forum is an important platform to discuss challenges and solutions, and develop the necessary plans and strategies to achieve the aspirations of Arab countries, and ensure a prosperous and sustainable future for generations to come. HE Christine Lagarde, Managing Director of the IMF and HE Dr. Abdulrahman A. Al Hamidy, Director General Chairman of the Board of the AMF also delivered key note speeches.
“The Forum is an important platform for decision-makers and experts, as it provides an opportunity to exchange views and share experience. Therefore, we hope to be more transparent in discussing the challenges and proposing solutions, towards ensuring the sustainability of growth, looking at the circumstances of each country and its economic potential. We also hope that this forum will serve as a platform for further economic integration,” said Al Tayer.
HE Al Tayer added although 10 years have passed since the financial crisis, and it can be said it is over, the lessons learned need to be examined, the financial and economic conditions need to be assessed along with the readiness of each country to deal with any risk or major fluctuations in the global financial markets, and work to strengthen fiscal and financial stability.
“Arab finance ministries and financial institutions today are facing major challenges. Among these is how to meet the requirements of their role as enabler for economic growth and financial inclusion in line with available budgets, and hot to borrow within the reasonable limits that do not exceed financial safety standards, so that borrowing does not come at the expense of the next generations’ standard of living,” he added.
During her opening speech, HE Christine Lagarde said that any countries have undertaken important reforms on the revenue side, including the recent introduction of a VAT in Saudi Arabia and UAE. This is an important step toward diversifying revenue and building tax capacity. There is of course scope to do more as domestic revenues are very low, averaging only 10 per cent of GDP. This must be done with equity and fairness in mind—both of which are conditions for the acceptability of taxation. “This year we focus on the other side of the coin, expenditures. Revenue and expenditure policies complement each other and should be evaluated jointly as a package to achieve fiscal, economic, and social objectives. There are some promising angles when it comes to improving spending efficiency. One is digitalisation, which can help countries deliver public services more effectively at lower cost. Think about better identification and authentication systems, such as biometric technology. Another important area entails strengthening governance and improving public financial management. And of course, I would not close my remarks without recommending gender budgeting. Overall, I am convinced that with the right reforms in the right context and with the right protections, fiscal policy will be able to support your vital economic and social goals.”
HE Dr. Abdulrahman A. Al Hamidy, Director General Chairman of the Board of the AMF expressed his thanks to HE Obaid Humaid Al Tayer for his valuable contributions to the opening of the 3rd Arab Fiscal Forum, as well as the constant support provided by HE Al Tayer and the Ministry of Finance in preparing such activities.
“One of the most important features of the reforms that Arab governments are working on is the follow- up of the efforts of economic diversification and reforms of the support system, thus enhancing the chances of financial sustainability and encouraging the creation of an environment conducive to private sector growth. There was a marked interest in strengthening public resources to cope with increased government spending and improved fiscal conditions, including increased efficiency of the support system,” said Al Hamidy.
HE added that authorities in Arab countries have been keen to undertake structural reforms over the past years with the aim of reforming the subsidy system, especially energy support. The total value of the energy bill for Arab countries declined from $117 billion in 2015, to about $98 billion in 2017. The disparities in experiences among and within Arab countries shape opportunities in studying support reforms to match the conditions and structure of these countries.