World Bulletin / News Desk
The International Monetary Fund on Thursday advised Saudi Arabia not to rush reforms and price hikes as the oil-rich kingdom looks to overhaul its economy to cope with low crude prices.
"If fiscal consolidation proceeds too rapidly, it would adversely affect growth" and involve large hikes in prices of fuel and power, a new report said.
Faced with a sharp decline in oil income following the 2014 price crash, Riyadh has posted budget deficits totalling $200 billion (170.5 billion euros) in the past three years, and is forecast to register a $53-billion shortfall this year.
The kingdom's economy -- the largest in the Arab world -- has also contracted in the first two quarters of the year due to lower crude prices and production.
Authorities have launched a major economic reform programme, dubbed Vision 2030, to reduce dependency on oil and introduced austerity measures.
One of those initiatives is the Fiscal Balance Programme, under which Riyadh aims to restore a budget balance by 2019 and return to surplus the following year.
But an IMF team that visited Riyadh in the summer recommended a more gradual implementation, with the aim of posting a deficit-free budget by 2022.
Saudi Arabia's austerity measures have so far included boosting excise taxes on tobacco and soft drinks, increasing energy and water prices and raising expatriate labour fees, which are charges paid by employers for every foreigner they hire.
A second wave of hikes is expected in 2017, likely targeting gasoline, diesel and electricity prices.
Gross revenue gains from raising fuel and electricity prices are forecast to reach $67.7 billion by 2020, the IMF estimates.
The kingdom also plans to impose, for the first time, a five-percent value-added tax (VAT) at the start of next year -- a timeframe the IMF has said could pose a challenge.
The government is forecast to collect some two to three percent of gross domestic product (GDP) from excise tax and VAT by 2020, about $20 billion (17 billion euros).
Non-oil growth is expected to pick up this year, but overall GDP growth will be close to zero given the decline in oil production.Last Mod: 05 Ekim 2017, 17:54