By Martin Sommer, Juan Treviño, and Neil Hickey

The significant and prolonged drop in oil prices since mid-2014 has changed the fortunes of many energy-exporting nations around the world. This applies particularly to countries of the Middle East and Central Asia, because these regions are home to 11 of the world’s top 20 energy exporters.

Budgets have generally turned from surpluses to large deficits (Chart 1), growth has slowed, and financial stability risks have increased. In such a challenging environment, a policy of “business as usual” will not suffice—policymakers will need to adopt significant measures to put public budgets on a sounder footing, address risks to liquidity and the quality of assets in the financial sector, and improve growth prospects. This will be a difficult long-term process, but the good news is that many countries have made a strong start, especially in terms of budget policies.

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Culled—iMFdirect