## Gulf Cooperation Council: How Can Growth-Friendlier Expenditure-Based Fiscal Adjustment be Achieved in the GCC?

## Source details

**Canonical URL:** [Gulf Cooperation Council: How Can Growth-Friendlier Expenditure-Based Fiscal Adjustment be Achieved in the GCC?](https://www.imf.org/en/publications/policy-papers/issues/2017/12/14/pp121417gcc-expenditure-based-fiscal-adjustement)

## Other formats

- [Markdown version](/en/publications/policy-papers/issues/2017/12/14/pp121417gcc-expenditure-based-fiscal-adjustement/index.md)
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## Bibliographic details
- Published: December 14, 2017

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### Summary
- After years of rapid growth in expenditure, GCC governments have started to implement significant fiscal consolidation measures, but more needs to be done.
- Rapid population growth and booming oil revenues led to large increases in government spending in the decade to 2014, which now stands high by international standards.
- This expenditure is dominated by compensation of employees and other current spending which are large in percent of GDP compared to Emerging Market (EM) countries and other oil exporters.
- High current spending keeps overall spending above levels consistent with long-term fiscal sustainability and intergenerational equity.

### International experience and lessons
- Growth outcomes improve when fiscal adjustments are:
  - sustained as part of credible multi-year fiscal plans;
  - reliant on expenditure more than revenue adjustment;
  - accompanied by improvements in expenditure composition (away from current outlays to more productive spending);
  - accompanied by improvements in the structure of revenue (away from direct to indirect taxation).
- Successful fiscal adjustments also tend to be part of wider structural reforms that support growth.

### Key policy implications and recommendations
- Prioritize expenditure-based consolidation over revenue-based adjustments to support growth outcomes.
- Implement credible multi-year fiscal plans to sustain adjustments and improve credibility.
- Rebalance spending toward more productive outlays and away from large current spending items such as compensation of employees.
- Shift revenue structures away from direct taxation toward indirect taxation, while integrating fiscal consolidation with broader structural reforms to enhance growth.

*Gulf Cooperation Council: How Can Growth-Friendlier Expenditure-Based Fiscal Adjustment be Achieved in the GCC? — December 14, 2017*

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## Content in this bundle

- **Policy Paper**
  - [Policy Paper (Markdown version)](/-/media/files/publications/pp/2017/pp121417gcc-expenditure-based-fiscal-adjustement.pdf.md){rel="alternate" type="text/markdown"}
  - [Policy Paper (PDF)](/-/media/files/publications/pp/2017/pp121417gcc-expenditure-based-fiscal-adjustement.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/policy-papers/issues/2017/12/14/pp121417gcc-expenditure-based-fiscal-adjustement_