IMF Chief Suggests Fiscal Reforms May Pave Road to Middle East Peace


Christine Lagarde, the outspoken and highly popular head of the International Monetary Fund (IMF), has made a rather bold statement about how to achieve peace in a region known for its many years of turmoil. She has called upon the nations of the Middle East to improve their taxation systems and enact significant fiscal reforms as a way to create political stability and, ultimately, peace.

Lagarde outlined her philosophical pathway to peace in the second speech she has delivered this week in the Middle East.

"I think the economic issues have to be at the table...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."

Christine Lagarde made her comments during the Global Women's Forum in Dubai. She went on to note that oil-dependent nations, as many in the Middle East are, face a "new reality" thanks to the decline in oil prices. At present, global oil prices are around $34 per barrel, a steep decline from the more than $110 per barrel they would have fetched in mid-2014.

This has led to budget deficits, unemployment, and general feelings of unease among many in the region. To counter the negative economic effects of cheap oil, nations like Saudi Arabia, the United Arab Emirates, and Bahrain have been forced to reduce subsidies, raising the cost of gasoline, electricity, and meat. This has exacerbated an already tense situation.

Lagarde's plan would be to use taxation and economic reform to stem the rising tide of disquiet by providing services and support in a manner similar to developed Western nations, rather than the subsidies approach currently observed. Lagarde also said young people needed to be shown that they have a future and feel confident in that knowledge, or else they could turn to extremism.

In previous statements, the IMF had warned that as many as 1.6 million young people would enter the workforce by 2018 in Saudi Arabia and other Middle Eastern nations. Unfortunately, at current levels of economic activity, there will only be an estimated 600,000 jobs available when they arrive. The frustration of these young people can be a key driver for movements, such as the Arab Spring uprisings that occurred in 2011.