The International Monetary Fund (IMF) has urged Saudi Arabia to keep public spending under control as the kingdom’s economy appears to be slowly recovering from the deep recession in line with climbing oil prices.
An IMF team in a statement on Tuesday called on Saudi authorities to “resist the temptation to re-expand government spending in line with higher oil prices.”
Figures released by the Saudi Finance Ministry last week show that 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 rulers face growing rumblings of discontent as authorities have already 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, adding “further gradual energy price increases should continue” for local consumers.
Saudi Arabia has posted a budget deficit since 2014 after the crash in oil prices, with shortfalls totaling $260 billion in the past four years.
The Saudi economy shrank 0.7 percent in 2017, the first contraction since 2009, but the international lender forecasts a return to growth this year.
On the economic front, economic experts have cast doubt on Saudi Crown Prince Mohammad bin Salman’s so-called Vision 2030 project, which aims to wean the Saudi economy off petrodollars and make the country more like “a normal non-oil state.”
The Saudi aggression against Yemen has left a deep impact on Saudi Arabia’s economy. Last month, figures showed that Saudi Arabia had surpassed Russia to become the world’s third largest military spender.
Washington has sold billions of dollars’ worth of arms to Saudi Arabia since Riyadh launched its deadly campaign against Yemen in 2015.
The administration of US President Donald Trump has asked Congress to review the planned sale of more than 120,000 precision-guided munitions to Saudi Arabia and the United Arab Emirates amid concerns of their use in Yemen.