ZCZC
BCN-11
SAUDI-BUDGET-IMF-ECONOMY
IMF urges Saudi Arabia to contain spending and wages
DUBAI, Aug 25, 2018 (BSS/AFP) – The IMF on Friday warned Saudi Arabia
against boosting spending in the wake of rising oil prices, urging the
world’s top crude exporter to also contain its wage bill.
The International Monetary Fund said in a report that a rise in spending
would expose the Saudi budget if there was an unexpected drop in oil prices.
The report emphasised “the importance of ensuring that spending remains at
a sustainable level in different oil price environments” and the need to
avoid a fiscal policy that would create undue volatility in economic
activity.
Oil prices have rebounded strongly after major producers decided to cut
output in late 2016. In June, they decided to raise production again.
Saudi revenues jumped 67 percent in the second quarter of 2018, mainly due
to a sharp rise in oil income.
In the same period, public spending surged 34 percent, according to
government figures.
Around half of state spending goes on the public wage bill, according to
the IMF which suggested “the workforce could be gradually reduced through
natural attrition”.
Saudi authorities told the IMF that the civil service system is under
revision with the help of the World Bank.
Unemployment among Saudi citizens is a high 12.8 percent, rising to 31
percent among women.
The country’s key challenge is to create around 500,000 jobs for its
citizens over the next five years, the IMF said while stressing the need for
more posts within the private sector.
As many as 1.4 million new jobs could be needed if female participation in
the labour market rises by just one percentage point a year until 2023, the
report said.
The IMF praised the outcome of Riyadh’s reform programme that included
cutting subsidies, raising fuel and power prices and imposing taxes.
“Higher oil prices should not slow the reform momentum,” the report said,
stressing that “continued commitment to implementing wide-ranging reforms
will help achieve the fiscal objectives and promote non-oil growth.”
Last month, the IMF raised Saudi Arabia’s growth forecast to 1.9 percent
for this year and the next.
The Saudi economy contracted by 0.9 percent last year, for the first time
since 2009, due to the collapse in oil prices.
Riyadh’s budget deficit is expected to continue to narrow from 9.3 percent
of GDP last year to 4.6 percent in 2018 and to as low as 1.7 percent next
year, the IMF said.
Saudi Arabia has posted a budget deficit for the past four consecutive
years, totalling $260 billion.
BSS/AFP/HR/0955