Fiscal Vulnerabilities with Saudi Crown Prince’s Economic Strategy Post Pandemic

Story Highlights
  • The Crown Prince plans to risk the governments' finances
  • Determines to build the infrastructure and technology sector of the kingdom
  • The post-oil era in the pipeline

Riyadh: Directing the kingdom’s two biggest companies Saudi Aramco and Sabic to reduce their dividends, Crown Prince Mohammed Bin Salman heads on a tortuous path of economic development. 

Sources reveal, he directed the Oil Giant and the Chemical Producer to spend the money locally and reduce their dividends which are mostly paid to the state. According to MBS, their expenditure on new infrastructure and technology will be big enough to accelerate the country’s growth and cause a jobs boom.  

Here’s how his plan would impact the budget and the economy of the gulf country.

Oil Money

 Despite controversial opinions, Aramco, the world’s largest oil company, states that it can sustain its dividend. Post pandemic crash, the oil firm was helped by Brent crude’s rise of almost 30% since December to $67 a barrel as more nations emerge from lockdowns. And last week the firm announced a deal that will see a U.S.-led consortium invest $12.4 billion in its territory.

Wage Settlement

Despite the downfall in its oil sector, the country managed to raise non-oil revenue from 166 billion riyals in 2015 to 358 billion riyals in 2020.  Currently, wages and pensions for state workers are expected to reach 491 billion riyals ($131 billion) this year.

Sovereign Funds

Prince Mohammed has pledged investment of at least $40 billion a year at home through 2025, creating new cities, resorts, and 1.8 million jobs. 

Related Articles

Back to top button