Saud Arabia cuts budget, hints at reform

The government of Saudi Arabia hinted at broad economic and regulatory reform in an announcement of spending cuts necessitated by the depressed price of crude oil.

A press release from the finance ministry forecast expenditures of the riyal-equivalent of $224 billion in fiscal 2016, compared with actual spending estimated at $260 billion in 2015. The 2015 estimate is 13% over budget and almost 15% below the 2014 actual level.

The ministry budgeted a revenue decline to $137 billion in 2016 from $162 billion in 2015, which was 15% below budget.

Revenue from oil sales totaled $119 billion in 2015, down 23% from 2014.

The 2016 budget projects a drop in the fiscal deficit to $87 billion in 2016 from $98 billion in 2015.

The finance ministry said the government during the next 5 years will develop policies “designed to achieve wide structural reforms in the national economy and reduce its dependence on oil.”

The policies, it said, will include “privatizing a range of sectors and economic activities; overcoming legislative, regulatory, and bureaucratic obstacles in the private sector; reforming and developing government performance; improving transparency and accountability levels; and enhancing the investment environment by contributing to the creation of new jobs in the private sector and providing partnership opportunities between public, private, and nonprofit sectors; and by improving the economy’s competitiveness and integration with the global economy.”

The statement also indicated the kingdom’s heavy subsidization of essential services is subject to change.

Under review, it said, is “government support, including revision of energy, water, and electricity prices gradually over the next 5 years in order to achieve efficiency in energy use, conserve natural resources, stop waste and irrational use, and minimize negative effects on low and mid-income citizens and the competitiveness of the business sector.”

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