Saudi Arabia takes action on public sector wage bill

27 September 2016

Government ministers accept pay cut

Saudi Arabia’s cabinet has issued a decree cutting ministers’ pay by 20 per cent and suspending any bonuses or pay rises in the public sector.

End of Islamic year bonuses would have been due in late September.

Stipends paid to the Shura Council members were cut 15 per cent.

The decree also freezes public sector hiring, and indicate that foreigners in non-essential positions should be terminated. Existing public sector employees should be recycled to fill key vacancies.

Benefits such as allowances, phones and cars have also been cut, as well as allowances to students studying abroad, diplomats and health workers.

The National Transformation Plan (NTP) aims to reduce Saudi Arabia’s public sector wage bill from 45 per cent of government spending to 40 per cent by 2020.

The kingdom is facing a major budget deficit due to lower oil prices. Public debt is forecast to climb to 30 per cent of economic output from 7.7 per cent currently. It has delayed project awards and payments to contractors in response, as well as cutting some subsidies.

In previous years some of the windfall from oil exports was used to create government jobs, and reducing the public sector wage bill has been politically difficult. However, encouraging Saudi nationals to seek private sector jobs has been a long-term challenge in a country where the government still employs two-thirds of local workers.

The NTP aims to add 450,000 jobs in the private sector by 2020, and increase the role played by the private sector in the economy.

Saudi Aramco is also asking foreign firms to hire more Saudi Nationals.

The longer-term Vision 2030 also includes an objective to lower the rate of unemployment from 11.6 per cent to 7 per cent. The kingdom plans to increase women’s participation in the workforce from 22 per cent to 30 per cent.

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