Gulf states to borrow billions to plug budget deficits: Report

The oil-rich Gulf states are expected to borrow between $285bn and $390bn through to 2020 to finance budget deficits resulting from low oil prices, a report said on Sunday.

The six Gulf Cooperation Council (GCC) states, which heavily rely on oil earnings, are expected to post a shortfall of $318 billion in 2015 and 2016, the Kuwait Financial Centre (Markaz) said in a report. The GCC is made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

The report comes as Dubai, a non-oil-rich emirate whose economy is now heavily focused on banking, tourism and other services, announced plans to build a tower that will stand higher than its Burj Khalifa, currently the world's tallest skyscraper.

The viewing tower will cost around $1bn and will be "a notch" taller than Burj Khalifa, property developer Emaar's chairman Mohamed Alabbar told reporters as he revealed details of the project.

The public finances of the GCC as a whole have been hit hard since oil prices shed more than two thirds of their value since mid-2014.

Oil income accounted for more than 80 percent of public revenues in GCC states before the price decline.

Markaz said that GCC states will finance their deficits partly through borrowing and the rest by tapping their huge fiscal reserves.

Saudi Arabia, which dominates the Organisation of the Petroleum Exporting Countries, last year borrowed $26bn from local banks and used more than $100bn of its reserves, which stood at $732bn at the end of 2014, the report said.

With the exception of Oman and Bahrain, GCC states have huge fiscal reserves and a low level of public debt, allowing them to raise large volumes of domestic and international debt, the report said.

The GCC states posted a combined deficit of $160bn last year compared with a surplus of $220bn in 2012.

In an earlier report in February, Markaz expected GCC public debt to rise to 59 percent of gross domestic product in five years, from 30 percent at the end of 2015.