Saudi Arabia to cut wage bill to 45% of budget next year, crown prince says
The country's wage bill was 50% three years ago
Saudi Arabia could cut its public wage bill to 45 per cent of the kingdom’s total budget next year despite growth in employment in the Arab world’s biggest economy, its crown prince said on Wednesday.
“The rate of spending, the capex is increasing and the salaries [the ratio of public wage in the budget] are decreasing,” Mohammed Bin Salman told delegates at the Future Investment Initiative summit being held in Riyadh. “Three years ago, the rate of salaries to the budget was 50 per cent [and] we expect it next year to be 45 per cent [although] spending is increasing.”
The public wage bill is decreasing despite a rise in the employment level in the country, and unemployment will continue to fall, he added.
Saudi Arabia, Opec’s biggest oil exporter, has to tighten its purse strings in the wake of a three-year oil price slump that saw crude prices falling from the peak of $115 per barrel in mid-2014 to less than $30 a barrel in the first quarter of 2016. The kingdom, which relies heavily on hydrocarbons for revenue, was forced to cut spending on mega projects, reform subsidies and control the public wage bill.
Oil prices have since breached $80 per barrel this year, helping the government to fuel its economy. However, Saudi Arabia is still pushing ahead with the economic reform agenda driven by the crown prince.
“I ask everybody not to believe me, just look at the numbers. Numbers speak louder,” he said when asked if the kingdom will continue to pursue its economic reform agenda.
The prince said that the kingdom will completely transform in the next five years and so will the other Arabian Gulf nations.
The Public Investment Fund, the kingdom’s Sovereign wealth fund, is at the heart of the economic overhaul programme, investing heavily in domestic and international assets to generate alternative revenue streams for Riyadh.
The crown prince said the PIF, which has a domestic and international portfolio of about $300bn, could reach $400bn next year, achieving its 2020 target in 2019 and by 2020 it could expand its portfolio to reach $500bn. By 2030, the fund which has investments in assets like US ride-hailing company Uber, and electric car makers Tesla and Lucid in the United States, could have a portfolio of $2 trillion or more by 2030.
Bahrain’s Crown Prince Salman Al Khalifa, speaking on the same panel, said the $10bn financial aid package extended by Saudi Arabia, the UAE and Kuwait for the kingdom, the smallest Gulf economy, has enabled the country to “restructure” its economy.
Bahrain expects $600m worth of foreign direct investments this year, which will further improve next year, he added.
Updated: October 24, 2018 09:06 PM