Riyadh mandates early closing of national accounts

14 October 2015

New date to make payments from current budget moved forward by a month

  • New directive in line with tightening control over budget
  • Measure follows no-award order for new projects for the rest of 2015
  • Kingdom set for 20 per cent deficit of its 2015 GDP

Saudi Arabia’s Finance Ministry is closing its national accounts one month earlier than usual in a move that is understood to further scale back spending in the kingdom, according to a report by UK-based news agency Reuters.

The ministry is reported to have asked government agencies to bring forward from mid-December to mid-November the final date to make payments from budget allocations and other accounts for the current fiscal year.

It is unclear what strategy government agencies would adopt to cope with the Finance Ministry’s early deadline.

This measure follows the ministry’s directive to freeze all project awards for the rest of the year, in addition to suspending any further appointments and promotions, and any further expenditure on new vehicles or property rentals.

The no-award order is now expected to result in Saudi Arabia’s projects market reaching a new low since 2008.

These measures present a stark contrast to the kingdom’s spending spree over the years when high oil prices flooded its national coffers.

The Washington-based IMF estimates that Saudi Arabia could run a 20 per cent deficit of its GDP in 2015 due to sustained low oil prices and government spending.

In August, US-based Fitch Ratings revised its outlook for Saudi Arabia from stable to negative, although it has affirmed the kingdom’s AA rating. The downgrade in outlook was due to lower oil prices.

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