In February, the IMF offered an optimistic global outlook, but once again called on regional governments to rethink their fiscal policies to improve non oil-related revenues. 

Action is being taken in this regard and the month also saw the Saudi cabinet approve the proposed introduction of a GCC-wide  value-added tax (VAT) levy from 2018. Elsewhere in the region, Egypt launched the sale of a triple-tranche bond at $4bn, and the UAE laid the foundations for a programme that will see it establishing the first human settlement on Mars within 100 years.

Meanwhile, the region is still waiting for clarification from the US over the future of the Iran nuclear deal.

IMF says fiscal reform vital for regional growth

IMF managing director Christine Lagarde has said the fund is expecting global economic activity to pick up this year, but warned that regional governments must ensure robust public finances to create the resilience needed to alleviate the effects of conflict and low oil prices.

2%

Share of GDP that could be derived from small sales taxes in the region

5%

Level of VAT expected to be introduced in the GCC on certain goods from 2018

AED10bn

Projected annual revenues from VAT in UAE

The IMF says the region must prioritise fiscal reform and strategies that interlink tax policy reform with revenue administration reform. “As a first step, countries are introducing VAT and other consumption taxes. Over time, they may also consider deriving revenue from income and property taxation,” said Lagarde.

US imposes new sanctions on Iran after missile test

The US has imposed fresh sanctions against Iran after the White House said Iran was “on notice” following a ballistic missile test it conducted earlier in February.

The new sanctions cover 25 individuals and entities, some based in the UAE, which the US Treasury Department says are connected to the ballistic missile programme, or linked to the Islamic Revolutionary Guard Corps’ Al-Quds Force, which carries out the body’s international operations.

“The Trump administration will no longer tolerate Iran’s provocations that threaten our interests,” said national security adviser Michael Flynn, who has since resigned.

Washington said the new sanctions are just the “initial steps” and that it was “undertaking a larger strategic review” into its response to Iran, although there have been no further details regarding the future of the sanctions-relief deal signed in 2015.

Cabinet approves unified VAT agreement

Saudi Arabia’s cabinet has approved a ‘unified agreement’ on VAT as the hydrocarbons-dependent GCC economies look to develop alternative revenue lines on the back of lower oil prices.

The cabinet gave the nod to the unified implementation of the tax from the beginning of 2018 at a meeting chaired by King Salman bin Abdulaziz in Riyadh. A 5 per cent tax is expected to be levied across the region on certain goods, following a GCC agreement last June.

US considers one-state solution for Palestine

The US has changed its position on the Israeli-Palestinian conflict by saying it will no longer insist on a two-state solution.

“I’m looking at two states and one state,” said US President Donald Trump. “And I like the one that both parties like. I’m very happy with the one that both parties like.” Trump made the comments during a press conference with Israel’s Prime Minister Benjamin Netanyahu in mid-February, where he promised to deliver a “great peace deal”.

His comments contradicted the US’ historic position of lobbying for a two-state solution, which would see the creation of an independent state of Palestine within pre-1967 borders made up of the West Bank, the Gaza Strip and East Jerusalem.

Egypt sells $4bn multi-tranche bond

The government has launched a triple-tranche bond that has raised $4bn, twice the funding target set when Cairo started investor meetings in mid-January.

The new senior unsecured five-year, 10-year and 30-year bonds are issued under the Global Medium-Term Note programme. The government is paying investors 6.1 per cent for a $1.75bn note maturing on 31 January 2022. The $1bn, 10-year tranche offers 7.5 per cent, while the 30-year, $1.25bn issue offers 8.5 per cent interest.

6-9%

Interest that Cairo will pay to investors for the new bonds

$13.5bn

Combined order books of bonds

B

Rating from Fitch for the new bonds

US-based Fitch Ratings marked the new issues at ‘B’, consistent with the country’s existing senior unsecured ratings and its long-term foreign-currency issuer default rating of ‘B’ with a stable outlook.

Riyadh and Kuwait discuss resumption of oil production

Saudi Arabia and Kuwait discussed the resumption of crude output from the Divided Zone on the sidelines of the Joint Opec-Non-Opec Ministerial Monitoring Committee meeting in Vienna in late January.

Discussions have been held between Kuwait and Saudi oil minister Khalid al-Falih on production from the Khafji oil field, which lies in the Divided Zone. There is no timeline for resumption.

The Khafji field was producing 300,000 barrels a day (b/d) before being shut down in October 2014 due to environmental reasons. The Wafra field, which also lies in the Divided Zone, was closed in 2015 due to operational difficulties.

Refugees continue to dominate Lebanon’s economy

The IMF says the conflict in Syria continues to dominate Lebanon’s economic outlook, with registered refugees accounting for more than one-quarter of the population.

The fund estimates that GDP increased by 1 per cent in 2015, and expects a similar growth rate for 2016. For 2017, the IMF does not expect growth to return to higher levels.

“Lebanon’s traditional growth drivers – tourism, real estate and construction – have received a significant blow and a strong rebound is unlikely based on current trends,” says the fund.

Inflation declined sharply in 2016 on the back of lower oil prices. It is forecast to return to about 2 per cent by early 2017.

UAE reveals ambition to settle on Mars

The UAE’s space programme aims to establish the first human settlement on Mars within 100 years, according to the country’s Vice-President and Prime Minister, and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum.

$20bn

Direct investment by UAE into space programmes since 2014

13

International space cooperation agreements in place for the UAE

2020

Planned launch of UAE mission to Mars

Called Mars 2117, the final stage of the project will see the establishment of the first “inhabitable” human settlement on Mars.

The first phase of the scheme will focus on preparing local scientists to speed up the research project in partnership with major international scientific research institutions, the Dubai Government Media Office said in a statement.

 

 Mohammed al-Ahbabi, director-general of UAE Space Agency

Mohammed al-Ahbabi, director-general of UAE Space Agency

Mohammed al-Ahbabi, director-general of UAE Space Agency

“We would like a space port,” UAE Space Agency director-general Mohammed al-Ahbabi tells MEED in an exclusive interview. “We would like it to operate like an airport that is open for everyone. Not just one operator, but open to all operators.”

 

Read the full interview here

Further reading

Kuwait inks eastern upstream oil processing contract

Kuwait Oil Company has awarded the local Mechanical Engineering & Contracting Company the main deal for upstream oil processing at Gathering Centres 9, 10, 20 and 22. The firm submitted a low bid of KD59.4m ($195m).

Contractors set to sign Qatar World Cup stadium deal

A joint venture of Turkey’s Tekfen and the local Al-Jaber Engineering is set to ink an agreement with the Supreme Committee for Delivery & Legacy to build the $342.5m Al-Thumama Stadium in Qatar, which is also known as the Fifth Precinct Stadium.

Egypt drops PPP plan for Abu Rawash wastewater project

Egypt’s Construction Authority for Potable Water & Wastewater has dropped plans to procure the Abu Rawash treatment plant under the public-private partnership (PPP) model. MEED has confirmed the project will now be developed under a conventional model.

Hyflux signs agreement for Saudi desalination plants

Singapore’s Hyflux has signed a memorandum of understanding with Saline Water Conversion Corporation to design and build three desalination plants at Duba, Al-Wajh and Haql in Saudi Arabia, with a capacity of 16,000 cubic metres a day.