New Austerity program in Saudi Arabia aiming at unfinished projects
Saudi Arabia’s oil-based economy has seen so many fluctuations since the first drilling projects, but the kingdom had a great growth by the oil price explosion in 1970s. The oil windfall changed the face of the kingdom and people, especially within the next decades when they got more accustomed to abundance.
The 2014 oil slip had its impact on welfare in Saudi Arabia since they used their currency reserves and face a budget deficit reached 16% of economic output. The oil price collapse carried big challenges to GCC countries especially Saudi Arabia as engaged directly to regional conflicts.
The kingdom has been facing the regional changes politically and economically since 2011 when the “Arabian Spring” began; the army was engaged in Yemen civil war.
Seeking a recovery for the future fiscal programs, the ministry of finance confirmed wide-ranging economic reforms, including the government spending cut on some public and domestic projects. They established the “Office of rationalization of capital expenditure” so as to decrease the costs and save the budget. The office has saved more than 21 million dollars till the last February, as announced Mohammed Al-Jedan, the kingdom minister of finance.
By rationalizing the costs, Riyadh hopes to be able of financing its overall spending swollen as a result of oil price collapse and also the kingdom’s banding problems, especially that of Yemen war.
Therefore, Office of rationalization of capital expenditure in Saudi Arabia made a list of unfinished projects in the kingdom, of which the rate of execution has not reached 25% yet to be abolished or suspended for the sake of the present necessities.
Cutting welfare budget and halt financing the infrastructure making projects, all are signs of a killing fever for the kingdom’s economy that was once one of the best growing in Middle East.
Weather these austerity plans will be effective for the shrinking Saudi economy or backfire, all depends on the time and on the other hands, it depends on the authorities to decide how to plan and act.