IMF tells Gulf finance chiefs to keep wartime support temporary and rebuild buffers

The IMF told Gulf finance ministers and central bank governors, in remarks published on 1 October, that the energy supply shock from the regional war has been contained, but that the Gulf Cooperation Council economy is still expected to contract in 2026, according to the Managing Director's remarks to the group. The text projects a strong recovery in 2027 if shipping gradually normalises, and says the downside risks depend on the duration, severity and geographic reach of the conflict. It gives no numerical forecast for the GCC.

The remarks, delivered seven months into the war, say GCC authorities rerouted critical supplies away from the Strait of Hormuz and that market adjustments, including new supply, inventory drawdowns and lower demand, helped contain the shock, according to the IMF text. The near-closure of Hormuz and disruption in the Red Sea have nonetheless sharply cut oil and gas exports, damaged energy facilities and constrained non-oil activity. Bahrain, Saudi Arabia and the United Arab Emirates, which have larger non-hydrocarbon sectors, were less affected.

Conditions on fiscal support

The Fund's fiscal advice is to keep support temporary. Aid to households and firms should be targeted, transparent and carry a clear sunset, and broad stimulus should be avoided where supply disruption is the main problem, the remarks say. Once conditions normalise, governments should rebuild buffers and direct fiscal space towards diversification and economic security.

The text also limits what buffers can do. It says: "Fiscal buffers are indispensable but cannot substitute for physical resilience to trade shocks." Storage and inventories help with short disruptions, while longer ones require infrastructure that can reroute trade, the IMF text says, citing the GCC Railway and the Saudi Landbridge as ways to reduce losses from a Hormuz closure and to raise output even when the strait is open.

Structural reform and digital assets

On structural policy, the Fund calls for reforms to continue whatever the oil price: a larger role for the private sector, a better business climate, skills aligned with labour market needs, and use of digitalisation and artificial intelligence, according to the remarks.

The regulatory passage concerns digital assets. The text says on-chain activity is estimated to have risen from US$6 billion in 2020 to US$92 billion in 2024, and cites benefits for payments and capital markets alongside macro-financial, operational and regulatory risks, according to the IMF. It calls for robust legal, regulatory and supervisory frameworks, better data and monitoring, and international cooperation. The remarks do not name any Gulf regulator or rule.

The Fund also signals demand for its own resources. It expects greater demand for IMF financing and thanks GCC members for their financial support to Fund facilities, the text says. Capacity development for the region is delivered through the Center of Economics and Finance in Kuwait and the Fund's Regional Office in Riyadh.

EU summit with the bloc postponed

The diplomatic calendar changed two weeks after the IMF remarks. On 15 October the Council of the EU said the second EU-GCC summit, planned for 24 October in Riyadh, has been postponed, according to its press release. The release gives no reason and says a new date will be announced in due course. It describes the partnership as strategically important to both regions and says the EU intends to deepen it, building on momentum since the first summit in October 2024.

The European Council's conclusions of 15 and 16 October list the Middle East among their topics, alongside competitiveness, Ukraine, Moldova, the next multiannual financial framework, defence, migration and enlargement. The summary page does not set out what the conclusions say on the Gulf, and the postponement release does not link the decision to the war or to any other event.