Growing disparities in Gulf fiscal policy

The past month has brought further signs of diverging attitudes in the Gulf to dealing with the fiscal headache caused by low oil prices. If media reports are to be believed, the UAE looks set to follow up last month’s deregulation of fuel prices by introducing a sales tax and a corporation tax. This should help to reduce the budget deficit which, in any case, didn’t look like it would be that large. In contrast, Saudi Arabia’s announcement of large scale bond issuance suggests that the authorities will delay any fiscal tightening. The Kingdom should be able to issue bonds at relatively low yields for some time. But fiscal consolidation cannot be put off forever.