Saudi govt says making faster than expected progress in cutting costs

The King Abdullah Financial District, north of Riyadh, Saudi Arabia.

Saudi Arabia’s government is making faster than expected progress in cutting costs and that is the main reason for a stronger budget position so far this year than originally projected, a top official said on Thursday.

Last week, King Salman announced he was restoring financial allowances for civil servants and military personnel, after cutting them last September to help curb a huge budget deficit caused by low oil prices.

Vice Minister for Economy and Planning Mohammed al-Tuwaijri told Reuters the government was able to take this step, while remaining on track to eliminate its deficit by 2020, largely because of big gains from cost cutting.

The deficit was 26 billion riyals ($6.9 billion) in the first quarter of this year, far below the government’s projection of 56 billion riyals, he said.

About 17 billion riyals of the difference was due to cutting costs while roughly 4 to 5 billion riyals was contributed by higher than expected non-oil revenues, with other factors responsible for the rest of the difference, Tuwaijri said.

Conservative assumptions

The government is trying to make its bureaucracy operate more efficiently and to reduce waste in procurement and other areas. Its original 2017 budget plan made conservative assumptions about how much money would be saved in this way.

Now, the full potential for cost cutting is becoming clearer to policymakers, Tuwaijri said.

“When we talk about efficiency and potential, this is a major upside for Saudi Arabia. Definitely, there is still a lot of opportunity for cost rationalization.”

Tuwaijri said policymakers had voted to restore the civil service allowances, which were very unpopular among many citizens, to improve welfare and stimulate economic growth, but had done so only after confirming that the extra spending would be offset in other areas.

“The decision on a balanced budget by 2020 hasn’t changed – it stays the same.”

The government’s original 2017 budget plan projected a deficit of 198 billion riyals ($52.8 billion) for the full year.


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