Oil’s dramatic price fall has sent shock waves through many Middle Eastern economies.
Generous fuel and food subsidies have been slashed, new taxes introduced, and social benefits axed.
The years when oil cost $100 a barrel and generated $1 trillion in export revenues are gone, and the oil-rich Gulf nations and their people are being forced to accept a new reality.
Here are some of the painful measures they’ve introduced:
Kuwait enjoys one the world’s lowest oil production costs. The country also boasts one of the oldest sovereign wealth funds.
Still, the collapse in crude prices is forcing Kuwait to think the unthinkable: tax company profits.
The plan for a corporate tax rate of 10% follows a move by all Gulf states to roll out a 5% sales tax during 2018.
“The fact that Kuwait is going down the taxation route for corporates is a very different form of … revenue generation,” said Monica Malik, chief economist for Abu Dhabi Commercial Bank.
United Arab Emirates
The UAE was the first Gulf country to target fuel subsidies when it introduced market pricing for petrol last summer.
Robin Mills, CEO of oil consultancy Qamar Energy, said the move triggered a domino effect. “Once one country feels able to take the step of removing subsidies as the UAE did in this case and that seems to go okay, then other countries get some confidence in following them,” said Mills.
All six countries in the region are now cutting subsidies, raising prices at the pump and the cost of water and power.
Ratings agency Moody’s downgraded its outlook for the Saudi banking system on Wednesday.
It highlighted Saudi Arabia’s 14% reduction in public spending this year as a key factor behind the move.
The region’s largest oil producer has already introduced deep spending cuts, cut subsidies, and even slashed its foreign scholarship program.