Dubai/Riyadh: Saudi Arabia is seeking to cut billions of dollars from next year’s budget because of the slump in crude prices, according to two people familiar with the matter.
The government is working with advisers on a review of capital spending plans and may delay or shrink some infrastructure projects to save money, the people said, asking not to be identified as the information is private. The government is in the early stages of the review and could look at cutting investment spending, estimated to be about 382 billion riyals ($102 billion) this year, by about 10 per cent or more, the people said. Current spending on areas such as public sector salaries wouldn’t be affected, the people said.
The Arab world’s largest economy is expected to post a budget deficit of almost 20 per cent of gross domestic product this year, according to the International Monetary Fund. With income from oil accounting for more than 90 per cent of revenue, a more than 50 per cent drop in prices in the past 12 months has put pressure on the nation’s finances. The country has raised at least 35 billion riyals from local bond markets this year, the first time it has issued securities with a maturity of over 12 months since 2007.
Capital investment is forecast to be 382 billion riyals this year with current spending at 854 billion riyals, according to a report issued by Samba Financial Group on Aug. 18. Saudi Arabia needs “comprehensive energy price reforms, firm control of the public sector wage bill, greater efficiency in public sector investment,” the IMF said this month. “The sharp drop in oil revenues and continued expenditure growth would result in a very large fiscal deficit this year and over the medium term, eroding the fiscal buffers built up over the past decade.”
The Ministry of Finance declined to comment.