The Washington-based IMF says that Saudi Arabia must maintain the pace of economic reform in the kingdom after adjusting its economic targets last year.
“We have last year recommended that the Saudis pace the adjustment in a way that will have less negative impact on their economy. The reason for that is a country like Saudi Arabia has ample levels of buffers, and therefore can afford adjusting the pace to have the least negative impact on growth,” says Jihad Azour, director of the Middle East and Central Asia Department at the IMF.
Riyadh has since late 2017 set new economic targets and softened the pace of reform, most notably its 2019 target date for a balanced budget originally set out in Riyadh’s Fiscal balance Programme.
“The target for balancing the budget has been shifted to 2023. In the meantime certain key measures were introduced like value-added tax as well as some other measures,” Says Azour. “Those reforms are in the right direction and we believe that this pace of reform should be maintained and the target for balancing the budget is the right one even if the price oil, as we are seeing, in the short term has increased.”
The IMF advices other countries in the region to also maintain the pace of economic reform, even if the increase in oil prices this year, together with the improved global economic outlook mean that the need to reform is now less urgent. “For all countries of the region, they should avoid complacency. They should avoid going back to the previous cycle of boom and bust with their economic policies connected to the price of oil,” says Azour.
After meeting with Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdulaziz al-Saud in Washington in March, IMF managing director Christine Lagarde said Riyadh was right to slow the pace of economic reforms in the kingdom last year.
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