DUBAI: The International Monetary Fund on Wednesday welcomed austerity measures by Middle Eastern oil exporters but warned that greater efforts were needed to plug budget deficits resulting from plunging crude prices.

The IMF said the six Gulf Cooperation Council (GCC) countries, along with Algeria, were implementing “ambitious fiscal consolidation measures” but predicted that shortfalls would continue to grow amid cheap oil.

“An additional substantial deficit reduction effort is required over the medium term to preserve fiscal sustainability,” it said in a report.

For GCC states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — further measures are also necessary to protect their currencies’ peg to the dollar, it added.

The IMF warned policymakers of “emerging signs of liquidity pressures in their financial systems and the risk of deteriorating asset quality.

“Deep structural reforms are necessary to improve medium-term prospects and facilitate much-needed diversification in order to create jobs for the growing labour force,” it said.

The value of oil and natural gas exports in the GCC and Algeria is projected to fall by almost $450 billion this year compared to 2014, according to the Fund.

It projected unemployment in those countries would rise by 1.3 million by 2021, and that their combined budget shortfalls would hit $900bn in that time.

In 2015 alone, the IMF estimated that GCC countries lost oil revenue worth $300bn.

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