Lower oil prices start to weigh on FX reserves in the Gulf

The plunge in oil prices means that current account positions in parts of the Gulf have slipped from surplus into deficit. In these countries, FX reserves are now being drawn upon to finance external shortfalls and sustain domestic spending but, so far at least, not at a pace that would raise serious concerns about the near-term sustainability of their external positions. Accordingly, the risk of currency devaluations remains small.