Reshaping the economy of Saudi Arabia has been postponed and blocked by political opposition and technical challenges for quite some time.
Recently, Saudi Deputy crown minister, Mohammed bin Salman, has privately set a plan in order to reshape the economy of Saudi Arabia to endure the drop of oil prices.
The outline of the new economic reform, which is expected to be public within a few weeks, includes many critical points related to spending state reforms, and privatization of several state bodies. First, the Ministry of finance would fund new projects only with the approval of the economic council, which is a new body established by the deputy crown prince’ father.
Second, some state entities would be privatized, in order to alleviate the pressure that the public sector is currently experiencing and create new job opportunities that can stimulate economic growth. Third, establishing various non-profit organisations within the education and the health care sector. Fourth, restructuring the water and electricity subsidies in order to benefit only the middle and lower class not the wealthy.
The decision of the reform came at a good timing, as the Saudi government has been running an annual budget deficit of over $100 billion, which forced the government to liquidate over $90 billion of foreign assets during the past 12 months in order to pay its bills. According to the International Monetary Fund this pattern, of liquidating foreign assets to overcome the deficit, is only sustainable for a few years.
Several economic experts saw that this reform is inevitable in order to reallocate the dependency of the Saudi economy on oil. Creating areas of economic strength would actually help the economic to further develop and face future potential slowdown.
It is to be mentioned that the idea of economic reforms has been suggested in the past, however, it has been blocked by opposing officials. Currently the Ministry of Economy and Planning and other state bodies are not declaring any comments related to the economic policy.
It is worthy to note that Saudi Arabia has got an oil-based economy with strong government control over major economic activities. It possesses 18% of the world’s proven petroleum reserves, ranks as the largest exporter of petroleum, and played a leading role in OPEC for many years. The petroleum sector accounts for almost all of Saudi government revenues, and export earnings.