Thursday, September 29th, 2016

Austerity measures: Saudi Arabia to cut ministers & officials’ salary, allowances

REJIMON K | September 29, 2016 1:13 pm Print
By this move, the Saudi government is signaling a determination to reduce the highest budget deficit among the world’s 20 biggest economies which is hit by low oil prices.

Saudi Arabia : King Salman

In a bid to cut ballooning budget deficit, Saudi Arabia will cut salaries and benefits of senior government officials, who were considered as untouchables once, from October 1. By this move, the Saudi government is signaling a determination to reduce the highest budget deficit among the world’s 20 biggest economies, which is hit by low oil prices.

The Saudi Press Agency, the official news agency, reported that the Custodian of the Two Holy Mosques King Salman has announced a 20 per cent reduction in the salaries of ministers or those who are of their rank.

The Royal Decree also includes a 15 per cent reduction in the annual subsidy granted to Shura Council (parliament) members for housing and furnishing. It also announces a 15 per cent reduction in the lump sum paid to Shura Council members for their car maintenance and fuel cost for four years.

The king also has announced in the decree that military personnel deployed on the southern border areas and other persons participating in military, intelligence and security operations abroad have been exempted from the decision of the Council of Ministers.

The decree also announces the suspension of granting cars to high-ranking officials up to the end of the fiscal year 1438/1439H. Any minister, or who is of his rank, will bear the cost of landline and mobile phones provided by the state as of 1/1/1438.

Under Deputy Crown Prince Mohammed bin Salman, the world’s biggest oil exporter has already delayed payments owed to contractors and started cutting fuel subsidies as it tries to manage lower oil prices leading to crisis in the construction sector. Many big and small companies have laid off their workers without clearing the workers’ unpaid salaries leaving them in lurch.

According to International Monetary Fund estimates, the budget deficit may narrow to 13 per cent of gross domestic product this year and below 10 per cent in 2017. The IMF says the Saudis need oil close to $67 a barrel to square the books. Currently, the oil price is hovering around $45 a barrel.

Saudi Arabia is in financial crisis because of a collapse in oil revenues that account for 80 percent of government income.

In 2015, the government posted a record $ 98bn budget deficit, causing many of the kingdom’s construction projects to be suspended or cancelled.

REJIMON K
Rejimon K is a senior reporter with Times of Oman in Muscat and also a migrant’s rights activist. He is an active member of MFA, the focal point for ILO and ITCU in Oman.
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