Press Release No. <a name="P16_75"></a>05/231

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today after a meeting in Jeddah, Saudi Arabia, with the finance ministers and central bank governors of the six-nation Gulf Cooperation Council (GCC) ¹:

"I appreciate the opportunity to meet once again with the finance ministers and central bank governors of the GCC. This regional dialogue provided a unique opportunity to discuss common challenges and explore ways to address them. I would also like to thank H.E. Ibrahim A. Al-Assaf, Saudi Arabia's Minister of Finance, for hosting this meeting in the Kingdom.

"The strong global economic expansion remains broadly on track with IMF staff projecting global growth averaging 4.3 percent annually in 2005 and 2006. I welcome the GCC countries' constructive and timely decision to increase oil production significantly in response to rapidly growing market demand, thus helping to sustain the ongoing global economic expansion. I fully endorse the investment plans undertaken by the GCC countries to expand crude oil and gas output capacity. However, even this may not be enough since projections show continued tightness in the world oil market over the medium term.

"The Middle East region and particularly the GCC countries have benefited from the global rebound and the associated increase in demand for oil and non-oil exports. Higher international oil prices in the recent past have strengthened significantly the financial position of the GCC countries. I am greatly encouraged by the authorities' resolve to seize the opportunity provided by the global economic recovery to build stronger macroeconomic foundations and at the same time boosting investment in human development and physical infrastructure.

"I am encouraged by the fact that structural reforms undertaken by the GCC countries have already contributed to engendering private sector investment and to a rebound in non-oil economic activity across the region over the past few years. I am confident that, with a further acceleration of the reform process—including higher public sector spending on programs with higher social returns, increased flexibility in public sector employment and better employment data—non-oil growth and employment opportunities in the GCC countries would grow at a faster pace. The regions' economic prospects would be further buttressed by the increased integration of the region with the global economy and the ongoing regional integration in the context of the planned GCC monetary union.

"I strongly support the GCC objective of establishing a monetary union by 2010. Significant progress toward regional integration has already been achieved through elimination of barriers to free movement of goods, services, capital, and national labor; and a common external tariff. All GCC countries have strong macroeconomic fundamentals characterized by large surpluses in the fiscal and external current account positions, credible pegged exchange regimes, and low nominal interest rate environments. Nonetheless, the path to the monetary union will require strong political commitment and the ability to undertake the policies and economic management associated with a single currency, including, for example, strengthening the provision of high-quality statistical information using common standards across countries. The Fund stands ready to assist by providing policy advice and technical assistance in our areas of competence and expertise—such as supporting the needed statistical efforts—and by sharing with you the experience of other regions."

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¹ The GCC is comprised of Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates