The International Monetary Fund (IMF) has estimated that the oil-producing Middle East states are set to make up to $1.3 trillion in additional revenues over the next four years as a result of high oil and gas prices triggered by the Russia-Ukraine war.
Jihad Azour, IMF director for the Middle East and North Africa, has reportedly told an international business platform that the region’s oil and gas exporters, particularly Gulf states, will see additional cumulative oil revenues of $1.3 trillion through 2026. He also added that the substantial gains would provide “firepower” to the sovereign wealth funds (SWFs) in the region.
The Fund had estimated the revenue windfall to be around $818 billion in April, two months after the start of the Russia-Ukraine war.
Most of the oil and gas exporters in the region have large SWFs and have been using them to allocate the windfall in further investments.
The IMF has estimated the growth rate of the GCC, including Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar and Oman at 6.4% in 2022, starkly in contrast to the growth rate which was pegged at 2.7% in 2021. GCC’s biggest economy, Saudi Arabia, is expected to grow its GDP at 7.6% this year, its fastest pace in a decade, and become one of the world's fastest-growing economies in 2022, as per IMF’s recent Article IV consultation report.
The Gulf boasts four of the world’s 10 largest SWFs by assets under management (AUM). According to the Sovereign Wealth Fund Institute, the Abu Dhabi Investment Authority (ADIA) has an AUM of $708.8 billion, the Kuwait Investment Authority (KIA) has $708.4 billion, Saudi Arabia’s Public Investment Fund (PIF) has $620 billion and Qatar Investment Authority (QIA) has $450 billion.
Global energy companies have gained substantially due to high oil and gas prices as a result of the supply chain disruption, mainly triggered by the fallout of the war between Russia and Ukraine. IEA’s Executive Director Fatih Birol, along with various country governments, has repeatedly advised energy companies to invest the windfall earnings in technology, renewable energy and other incentives to benefit their respective countries’ economies.
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