Saudi Arabia is intensifying efforts to shrink the highest budget deficit among the world’s biggest 20 economies, aiming to cancel more than $20 billion of projects and slash ministry budgets by a quarter, reported Bloomberg.
The government is reviewing thousands of projects valued at about 260 billion riyals ($69 billion) and may cancel a third of them, three people said, asking not to be identified as the discussions are private. The measures would impact the budget for several years.
A separate plan includes merging some government ministries and eliminating others, two people told Bloomberg, also speaking on condition of anonymity.
The world’s biggest oil exporter is taking unprecedented steps to rein in a budget shortfall that ballooned to 16 percent of gross domestic product last year, curtailing fuel and utility subsidies as well as cutting billions of dollars in spending. The International Monetary Fund expects the shortfall to drop to below 10 percent of GDP in 2017.
The Finance Ministry declined to comment, while officials at the Ministry of Economy and Planning weren’t available for comment when contacted by Bloomberg. Several senior government officials are accompanying Deputy Crown Prince Mohammed bin Salman on an Asian tour.
“The revenue and economic diversification strategy being pursued will only start to yield results over the medium- to long-term,” Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. “In the short term, it is a question of living with lower oil prices by cutting some capital spending, and financing what’s left via debt sales and drawing down foreign reserves.”