Riyadh — Saudi Arabia’s government is making faster than expected progress in cutting costs and that is the main reason for a stronger budget position so far this year than originally projected, Deputy Minister for Economy and Planning Mohammed Al-Tuwaijri has said.
Last week, royal decrees restored financial allowances for civil servants and military personnel, which were cut last September to help curb a budget deficit caused by low oil prices.
Tuwaijri said the government was able to take this step, while remaining on track to eliminate its deficit by 2020, largely because of big gains from cost cutting.
The deficit was SR26 billion ($6.9 billion) in the first quarter of this year, far below the government’s projection of SR56 billion, he said.
About SR17 billion of the difference was due to cutting costs while roughly SR4 billion to SR5 billion was contributed by higher than expected non-oil revenues, with other factors responsible for the rest of the difference, Tuwaijri said.
The government is trying to make its bureaucracy operate more efficiently and to reduce waste in procurement and other areas. Its original 2017 budget plan made conservative assumptions about how much money would be saved in this way.
Now, the full potential for cost cutting is becoming clearer to policymakers, Tuwaijri said.
“When we talk about efficiency and potential, this is a major upside for Saudi Arabia. Definitely, there is still a lot of opportunity for cost rationalization.”
Tuwaijri said policymakers had voted to restore the civil service allowances to improve welfare and stimulate economic growth, but had done so only after confirming that the extra spending would be offset in other areas.
“This year we have a crystal clear idea on market demand size, valuation, and financial advisers. The market appetite locally and globally, cash flow certainty, government off-takes and structure were all studied,” he said.
Tuwaijri saw that the revenues’ plan would transform the Saudi economy by putting large parts in private hands, while helping to repair state finances that have been severely hurt by low oil prices.
The Kingdom eyes around $200 billion through selling assets — he added that the “number was based on detailed studies of valuations and market demand since authorities announced plans for a privatization drive one year ago.” “Among the first assets to be offered will be King Faisal Specialist Hospital and Research Center in Riyadh. We are in a very advanced stage — appetite has been secured, the model is being made by relevant government authorities,” Tuwaijri stated.
Finance and economy expert Suleiman Assaf told a section of the Arabic press that Saudi Arabia will succeed in implementing more privatization projects in the future.
“Saudi Vision 2030 has determined contours of the economy and reshaped it all over again. The effect of privatization projects success will be visible soon and this is attributed to the ambitious vision of the country.” — Agencies