The International Monetary Fund has urged Gulf Arab states to prepare "an exit strategy from current spending levels" to promote long-term fiscal sustainability.
However, the Washington-based lending institution says in a report Wednesday the new lower-spending strategy should not be implemented until the economic conditions are right.
The IMF says Gulf states need to work on improving transparency and corporate oversight in government-related enterprises as they work to recover from the global economic downturn.
The report says challenges in the Gulf states' financial sectors may restrain growth in the short term but are not expected to have long-term implications.
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Listen to the interview with May Khamis, the co-author of the IMF report:
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The IMF released its report the same week that the Dubai World conglomerate invited creditors to a meeting to discuss a multi-billion dollar debt restructuring plan.
Dubai unsettled global financial markets last November when it asked creditors for permission to delay repayments on $26 million worth of debt in the property development project.
In March, Dubai's government announced it would provide $9.5 billion in aid to Dubai World as part of a restructuring plan.
The IMF says the markets in the countries that make up the Gulf Cooperation Council were "broadly flat" during the fist half of this year. However, the group projects growth will strengthen in the Gulf countries in 2010.
The Gulf Cooperation Council consists of the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.
Some information for this report was provided by AP and Reuters.
