World Economy
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Saudi Financial Condition Getting Worse

Migrant workers look for their names as they ask for a final settlement over salaries.Migrant workers look for their names as they ask for a final settlement over salaries.

The kingdom of Saudi Arabia is struggling with weak GDP growth, higher fees and taxes, and an economy that is unable to pay the dues to its workers, leaving thousands of workers from South Asia with an uncertain future.

When a nation is unable to provide food to its migrant workers, it says a lot about their financial condition, Business Insider reported.

The oil price crash has forced the oil kingdom to introduce austerity measures, and delay payments to already cash-strapped contractors.

“It looks like austerity has hit hard and more than we had anticipated, halting construction projects and stopping hiring,” said Jason Tuvey, Middle East economist at Capital Economics.

During the financial crisis in 2009, the government paid companies to help them tide over the cash crunch, however, this time, the finance ministry has cut advance payments from 20% to 5%, as reported by the al-Hayat newspaper.

"Money is not being paid at the top level," said one banker to the industry. "This has been going on since October, and it is hard to know how long it will go on for,” reported Reuters back in February of this year.

The thousands of stranded Indian and Pakistani workers—left without a job, and without basic amenities such as insurance coverage, food, shelter and medical facilities—are evidence that things aren’t any better now than they were in February. Most of them haven't received their salaries for the last eight months.

Empty Pockets

Setting aside the kingdom’s positive outlook, until the Saudi economy reduces its reliance on oil, the situation is likely to get worse before it gets any better. With oil prices reeling close to $42 a barrel, the Saudi economy is likely to run out of cash, according to the International Monetary Fund.

“All oil exporters will need to adjust to the new low oil price,” the IMF warned, reports the Independent. “All” in this case, includes, most importantly, Saudi Arabia.

Meanwhile, Saudi Arabia continues its record oil production, reaching 10.67 million barrels per day, up about 120,000 bpd on the prior month—with no signs of slowing.

And if oil prices continue to languish near today’s lows, it will be years before Saudi Arabia can regain its erstwhile glory.

Financialtribune.com