Fiscal cash burn in Middle East revealed by IMF

London (Quantum Commodity Intelligence) - Nearly all the oil exporting countries of the Middle East and north Africa will need to drain cash reserves or borrow in financial markets to meet government spending this year unless oil prices spike higher, the International Monetary Fund (IMF) said Monday.

The fiscal breakeven costs in 2021 range from a dizzying oil price of $242.8/b for Iran down to $43.1/b for Qatar.

Brent is currently trading around $63 to $64/bbl.

Saudi Arabia, which decided to cut an extra million b/d of production in the first quarter of this year on top of the ceiling quota for OPEC and its allies in a bid to boost global oil prices, needs oil prices to average $76.20/b this year to balance state spending, although this will drop to $65.70/b in 2022.

Many countries have pared back budgets in the wake of the Covid-19 pandemic that has decimated oil demand across the world.  

Oman's breakeven price will fall to $72.30/b in 2021 from $95.80/b in 2020.

The United Arab Emirate's breakeven price declines to $64.60/b from $68.20/b in 2020, the IMF said.

But Kuwait's fiscal breakeven price is expected to inch up to $69.30/b in 2021 from $68.10/b in 2020, but decrease to $64.50/b in 2022.

Iraq's breakeven price is projected to increase to $71.30/b in 2021 from $63.70/b last year.

Fiscal deficits in the Middle East and north Africa widened to 10.1% of GDP in 2020 from 3.8% in 2019, according to the IMF.

"Fiscal accounts deteriorated sharply across the region in 2020, reflecting lower revenue because of contracting domestic demand and the slump in oil prices, as well as policy support measures to mitigate the pandemic's impact," the IMF said in the report.

"Oil exporters recorded a larger deterioration in their public finances than oil importers did, reflecting lower oil revenue."