- Project management offices to scrutinize ministries spending
- Office to report to committee headed by deputy crown prince
Saudi Arabia is creating a special office to tighten oversight of government spending as the country grapples with sliding oil prices and its first projected budget deficit since 2009, two people with knowledge of the matter said.
The government is setting up a project management office that will report to the Committee of Economic Development, chaired by Deputy Crown Prince Mohammed Bin Salman, the people said, asking not to be identified as the information is private. This office will oversee similar bodies, being created in ministries, municipalities and state entities to ensure infrastructure projects are executed on time and within budget, the people said.
Saudi Arabia is trying to control spending as crude, which accounts for about 80 percent of revenue, slumped by over 50 percent since the end of August 2014. Last month, the International Monetary Fund warned the kingdom that it may run out of financial assets needed to support spending within five years. The country is tapping foreign reserves, cutting spending, selling bonds and delaying projects all while funding a war in Yemen.
“Saudi Arabia is looking to review its capital spending to focus on critical projects, whilst seeing where spending can be cut back,” Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, said Monday in e-mailed comments. “Current expenditure generally is harder to cut back than capital, as it includes areas such as wages and subsidies.”
The ministries of housing, municipalities, labor, health, education and transportation are some of those that will be affected, the people said. Saudi Arabia allocated $49.3 billion for spending on new projects in its 2015 budget, out of total planned spending of $229.3 billion. Still, Saudi Arabia’s public debt is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2 percent in 2014.
Saudi Arabia’s finance ministry declined to comment when contacted by Bloomberg.
Saudi Arabia’s net foreign assets fell to a near three-year low in September, as the government draws down financial reserves accumulated over the past decade, the Saudi Arabian Monetary Agency said in its monthly report on Oct. 29. The central bank’s investments in foreign securities plunged by $23 billion, while bank lending to private businesses grew at the slowest pace since April 2011, the data show.