Riyadh has introduced reforms to adjust economy to drop in oil prices
International Monetary Fund (IMF) says it welcomes Saudi Arabias spending controls as its economy adjusts to the drop in oil prices.
IMF staff welcome the control of government spending that is underway and the energy price adjustments that have been implemented, says Tim Callen, who led the IMFs Article IV mission to the kingdom that concluded on 12 May. Staff also welcome actions by the government to put in place mechanisms to strengthen accountability and improve the efficiency of its spending through the introduction of key performance indicators for ministries, the setting up of a National Projects Management Office, and increased scrutiny of new capital projects.
While spending controls have eased the pressure on government coffers that have had a severe impact on the construction sector as contractors have not been paid. Saudi Arabia is even considering IOUs as part payments owed to contractors in the kingdom in order to conserve cash.
Low oil prices and reduced government spending means the IMF expects Saudi Arabias real GDP growth to be 1.2 percent this year, down from 3.5 percent in 2015. It says lower oil revenues have resulted in current account and fiscal deficits which are expected to be about 9 and 14 percent of GDP, respectively, in 2016.
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