IMF chief says fiscal reforms key to Mideast stability

DUBAI, United Arab Emirates – The head of the International Monetary Fund on Tuesday called for greater taxation and fiscal reforms as a pathway to political stability in her second speech this week in the Middle East.

"I think the economic issues have to be at the table," Christine Lagarde said in remarks at the Global Women's Forum in Dubai.

"We cannot stop the warriors, we cannot bring truce, but certainly we can help with good economic policies... with a state that actually works for the benefit of people, that collects tax, that organizes public spending in an efficient way for countries, that finances infrastructure projects where it's needed."

Lagarde said oil-dependent states face a "new reality" as global prices hover around $34 per barrel, down from more than $110 in mid-2014. Facing widening budget deficits due to plunging oil revenues, Saudi Arabia, the United Arab Emirates and Bahrain have partially lifted subsidies, raising the cost of gasoline, electricity and meat.

Lagarde also said young people need to know they have a future.

The IMF has previously warned that up to 1.6 million young people will enter the workforce by 2018 in Saudi Arabia and other Gulf countries, but that only around 600,000 will find jobs in the private sector.

Young people's frustration at their lack of prospects was a key driver of the Arab Spring uprisings that rocked the Middle East in 2011.

A day earlier in Abu Dhabi, Lagarde called on Gulf states to diversify their streams of revenue by putting in place a regional value-added tax and eventually allowing for the introduction of personal income taxes, the lack of which draws millions of foreigners to the region to work.

Earlier this week, the Beirut Institute, a newly-formed think tank, released a 21-page set of recommendations in the UAE, stressing that "stagnant economic growth is a root cause of many of the most significant challenges facing the Arab region."

The institute, founded by prominent Arab journalist Raghida Dergham, said failure to provide economic growth would increase the social and political chaos that results from "persistent economic disenfranchisement of emerging generations."