World Economy

S. Arabia Outlines Economic Reforms

S. Arabia Outlines Economic ReformsS. Arabia Outlines Economic Reforms

Saudi Arabia’s deputy crown prince has privately outlined plans to reshape the economy to withstand low oil prices, sources said, in what could be the biggest policy shake-up since the kingdom’s economy was last hurt by cheap oil over a decade ago.

The strategy was presented by Mohammed bin Salman at a meeting this week with senior officials, businessmen and economists. It includes state spending reforms and privatizations in the world’s top oil exporting country, the sources said, Reuters reported.

The plans are expected to be made public in the next few weeks, the sources added demanding anonymity.

Officials have been talking about some of the reforms discussed at the meeting for years, but they have been blocked by political opposition, bureaucratic inertia and technical challenges.

Under previous administrations, institutions such as the ministry of finance dominated policy, but they have now been partially sidelined as pressure on the economy has grown because oil prices have dropped.

The government has been running an annual budget deficit of over $100 billion, forcing it to liquidate over $90 billion of foreign assets in the past 12 months to pay its bills–a pattern that is not sustainable for more than a few years, the International Monetary Fund has warned.

Officials at the ministry of economy could not immediately be reached for comment. The ministry and other state bodies have generally declined to comment on economic policy in recent months.

Some state bodies would be privatized to try to spur growth, create jobs and cut the financial burden on the public sector. Last month, the civil aviation authority said it aimed to start privatizing airports and related services in 2016.

In another apparent attempt to reduce the burden on the government, the creation of non-profit organizations would be encouraged, especially in health care and education.

A system of water and electricity subsidies, which cost the government billions of dollars annually, would be restructured so the benefits went to middle- and lower-income people, not the wealthy.

The government would do more to diversify its sources of revenue beyond oil, which the IMF estimates will provide over 80% of revenues this year. Taxes, such as a levy on tobacco imports, might be increased.