Fiscal Convergence and Discipline in the GMU

Although the GCC member states fulfill the GMU fiscal convergence criteria quoted from the EU, this paper indicates that these criteria did not suit the GCC economies. By clarifying the economic differences between the GCC region and the EU, studying the GCC economies fiscal data, and learning from the EU and the GCC member states experiences, the paper finds that: (i) The deficit and debt strategies did not fit the GCC' economics index by requiring economic depended on surplus and lower debt level strategies to design their fiscal criteria. (ii)The GCC government budgets depend highly on oil and gas. The macroeconomic shocks that the GCC region may face and its response to them are totally different than what affects the EU. So the GCC member states should have additional fiscal criteria, namely oil and gas sector share criterion and government expenditure, to reduce the potential danger of this dependency. (iii) To achieve and maintain fiscal discipline in the GMU and limit the politic influence and the regional authority on fiscal policies, GCC economies have to promote the permanent role of the criteria and set a strict time table that cannot be waived whatever the political desires. Furthermore, they need to adopt supranational independent institutions - before creating the GMU--that apply multilateral surveillance on the union economic activities.