Bahrain Mirror: The collapse in global oil prices is putting unprecedented strain on the cradle-to-grave welfare models of oil-rich nations in the Middle East, Moody's has warned. Oil prices rebounded to hit a seven-month high of $50 a barrel on Thursday, but remain 56 per cent lower than a peak of $115 in June 2014, reported the Financial Times.

The slump has forced governments in the Middle East to introduce a range of new taxes to help boost their coffers and reverse sharp increases in their budget deficits.

These include the introduction of a region-wide value added tax (VAT) of 5 per cent from 2018, and proposals for levies on corporate income and remittances.

"These reforms will bring an end to the traditional tax-free status of the GCC region and impact competitiveness", said Mathias Angonin, analyst at Moody's.

But the reforms could only "partly compensate for the continued oil price slump" he said.

"Low oil prices are testing even strong institutions".

Moody's has issued downgrades of three of the six oil-exporting Gulf nations in recent months - Saudi Arabia, Oman and Bahrain.

Consumption taxes, slashing subsidies and a retrenchment of government largesse also risks increasing social tensions, said the agency.

Of the Gulf nations, Bahrain, Oman and Saudi Arabia face the biggest obstacles to reforms as their "governments are under pressure to continue redistributing oil revenues to their populations to avoid economic-related civil unrest", said Moody's.

By comparison, Kuwait, Qatar and the United Arab Emirates boasted stronger government institutions that could help them withstand the oil price rout.