The sun has set on Gulf handouts to MENA countries

Climate change

The report also found that the countries it covered are determined to cooperate over climate change. Many have joined the 130 countries committed to net-zero carbon emissions between 2050 and 2060. That ambition comes with complications.

Read more: How Saudi Arabia is building a realistic roadmap for a circular carbon economy

Energy systems will get increasingly complex, creating economic challenges and making "financial, technological, and resource sharing among countries both necessary and inevitable to adapt to the changes," the report says.

It also found that MENA countries are behind in terms of climate finance. The region has 12 active climate funds, which collectively receive between $3.6bn and $4.9bn in annual flows, among the world's lowest rate of its kind. This starkly contrasts with the $83bn in 2020 alone provided to developing countries, a figure expected to reach $100bn annually in 2023.

Oil price spike

One of the consequences of the Russian invasion of Ukraine was a rise in energy prices, with the average cost of a barrel of oil reaching $100 last year, levels it is near once again.

Gulf oil revenues exceeded $570bn in 2022, of which $311bn was made by Saudi Arabia, $119bn by the UAE, $98bn by Kuwait, and about $43bn by Oman.

These vast and unexpected revenues enabled the GCC countries to make record budget surpluses, amounting, for example, to $6.3bn for the UAE during the first quarter of this year. The International Monetary Fund expects the UAE to have budget surpluses until 2028.

At the same time, GCC states were working to cut their dependence on oil and gas revenue. Changing how they invest, and fresh expectations for a return from outlays has ended the unconditional grants or financial support extended to several MENA countries, most notably Jordan and Egypt and often at times of crisis.

This transition is backed by a clear philosophy and transparent criteria. Those cover the stability of deposits in central banks and the need for reform alongside non-commercial financial support. Meanwhile, investments should be secured on potential returns, not political and social merits.

It amounts to a fundamental change in the foreign policies of the GCC countries.

These policies are a shift toward proper regional integration at a time when the politics in and among the Arab nations is less adversarial. It aims to instil a long-term ability for the area to withstand external shocks and achieve long-term stability.

The change also comes as Arab countries play a greater role on the world stage, driven by national priorities and awareness of global threats as a multi-polar international order develops.

Read more: Jeddah summit on Ukraine crisis showcases fresh perspectives on global security

Hand-outs didn't work

It is increasingly clear that the previous approach from the sponsor countries of the GCC toward their MENA neighbours did not work. Huge outlays fell short of achieving economic sustainability.

According to credible international research and leaks from the country's central bank, gulf aid to Egypt in the last decade hit $100bn. It has been criticised for lacking an official aid inventory, mainly from Saudi Arabia, the UAE, and Kuwait.

Saudi Arabia first signalled the shift from donors to investors among GCC nations. Its Finance Minister Mohammed Al-Jadaan spoke openly about the change in January at the World Economic Forum in Davos.

He said: "Future targeted aid will be conditional on the implementation of reforms … We used to provide grants and direct aid without conditions; we're changing that and urging countries in the region to make reforms... We're taxing our people and expecting others to do their part."

A month later, Kuwait's foreign minister, Sheikh Salem Abdullah Al-Jaber Al-Sabah, announced that his country was making changes to how it helps its Arab neighbours, revealing at the time that it would consider modifying its policies on providing aid to Arab and developing countries through the Kuwait Fund for Arab Economic Development (KFAED).

According to local Kuwaiti media, he said: "There are developments at the international level that require (Kuwait) to reconsider the mechanisms of the fund's work and harness it to preserve our national interests."

The sovereign wealth funds of the GCC countries will be key in helping the region diversify away from oil revenue as the world weans itself off fossil fuels.

They are estimated to be worth $853bn at the Abu Dhabi Investment Authority, $755bn at the Saudi Public Investment Fund, $475bn at the Qatar Investment Authority, and $750bn at the Kuwaiti Investment Authority.

Jordan adapts, Egypt stumbles

Jordan and Egypt are among the countries that have steadily benefited from generous and hitherto unconditional GCC support. 

They are faring very differently as times change.

In 2011, Jordan received $5bn in aid from the GCC. Then, $2.5bn more came in 2018 from Saudi Arabia, the UAE, and Kuwait amid protests which followed a severe political, economic, and living crisis. 

All the while, Jordan's debt burden was rising. It exceeded the size of the gross domestic product of the national economy in 2021. It is expected to have to borrow again from the international lender of last resort, the International Monetary Fund, just three years after securing the biggest such borrowing of its history.

But the loan has been agreed to, along with a series of reforms approved by the IMF – which Jordan has successfully implemented – meaning Gulf states are prepared to offer more support.

Reform is key

Applying the reforms even opened the way for a slight rise in support from GCC countries as they move to boost their $40bn strategic investment in Jordan. It is focused on services and industrial sectors through the Saudi-Jordanian Investment Fund. 

It will cover infrastructure, healthcare, tourism, technology, and expanded capital investments in promising Jordanian companies.

Conditions in Egypt are very different. It has not made progress with the reforms it agreed with the IMF. According to critics of the country's economic and financial policies, the military's influence has only grown as their primary determinant.

Egypt does not look ready to respond to the conditions of Gulf donors, with whom relations have become strained. Disagreements centre over the terms of a $40bn privatisation scheme approved last year and yet to achieve its objectives.

An IMF loan of $3bn was conditional on the sales, and other reforms. They were designed to move the private sector toward parity with the public sector and reduce the army's economic influence.

Egypt now stands accused of reneging on its commitments. That has damaged its talks with GCC investment funds.

The two nations show the differences in transitioning to different financial times. Jordan's has been smooth, while Egypt seems to be betting that its sponsors won't let it collapse.

This contrast in approach will probably define where the GCC's capital flows in a new era for it and the MENA countries.