IMF urges Saudi to contain spending as deficit widens

DUBAI: The International Monetary Fund has called on Saudi Arabia to keep public spending under control, even as a partial recovery of oil prices helps the economy emerge from recession. The lender called on the world’s top oil exporter to continue “bold structural changes” but to “resist the temptation to re-expand government spending in line with higher oil prices”, in a statement late on Tuesday.

Saudi Arabia has embarked on an ambitious reform drive, known as Vision 2030, as it seeks to reduce dependence on oil, diversify its income streams and modernize the economy. But figures released by the finance ministry last week show spending soared 18 percent to $53.5 billion in the first quarter of this year, outstripping a 15 percent increase in revenues, which hit $44.3 billion.

This created a quarterly budget shortfall of $9.2 billion, up 31 percent on the first three months of 2017. Despite the rising deficit, the IMF also congratulated the Kingdom for measures designed to boost non-oil revenues, in the wake of the 2014 crash in crude prices.

“Saudi Arabia is making good progress in implementing its ambitious reform program,” the Fund said, at the end of a visit to the country. Bolstering the national purse, the government has hiked local fuel and electricity prices, levied heavy charges on expatriate families and introduced a value-added tax (VAT) at the start of this year. “The VAT is a milestone achievement in strengthening the tax culture and tax administration of the country,” said the IMF, while adding “further gradual energy price increases should continue” for local consumers. —AFP