IMF points finger at oil exporters for bulk of global imbalances

Oil exporters are about to supersede Asian countries as accounting for the largest part of America’s current account deficit, according to the International Monetary Fund.

Saleh Nsouli, director, offices in Europe for the IMF, said in a recent speech that oil exporters would account for 46% of America’s deficit in 2006. In contrast, Asia would only account for 41% of the deficit.

The corresponding figures for 2005 were 41% accounted for by oil exporters and 47% by Asia. Nsouli’s remarks were based on work for the IMF’s key twice-yearly World Economic Outlook, which will be published later this month.

He also said that widening economic imbalances, in which the oil exporters played a growing part, are a threat to the global economy.

“The rising global imbalances suggest that the steps taken thus far are insufficient and that the world economy remains subject to serious risks of disorderly adjustment,” he said.

There are, in his view, two main reasons why such an adjustment is possible in the medium term. First, high oil prices have made America dependent on a volatile source of savings.

The agencies managing the oil exporters’ savings could be motivated by short-termist considerations.

Second, higher spending in oil-exporting countries could cause a rise in long-term American interest rates.

The IMF points out the doubling of oil prices from 2002-5 has led to the oil exporters playing a large part in global economic imbalances.

Over this period, their oil export revenue rose from $262bn (150bn) to $614bn.

A combination of rising global demand and concerns about future supply have driven up prices. In addition, since there is limited excess capacity, the oil price is expected to remain high as a result of a tight supply-demand balance.

However, the IMF also points out that in real terms the oil price is still substantially below its level of the late 1970s and early 1980s.

In today’s prices, the oil price exceeded $80 a barrel at that time, compared with an average of $53 in 2005.

In contrast to the 1970s, few of the “petrodollars” accumulated by the oil exporters seem to have been deposited in Western banks.