Riyadh maps out post-oil future

While Riyadh endeavours to boost its credit rating to Aa2 by 2020, it will have to walk a tightrope.

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Published: Thu 9 Jun 2016, 12:00 AM

Last updated: Thu 9 Jun 2016, 2:00 AM

Saudi Arabia's newly ratified National Transformation Programme has set an ambitious target for itself. It plans to more than triple its non-oil revenue by the year 2020 to 530 billion Saudi riyals. This means subsidies and grants will be slashed in an attempt to restructure the kingdom's economy amid falling energy prices. Riyadh had been making changes at the top, which included replacing its oil minister and merging a number of ministries, and scrapping some altogether. Deputy Crown Prince Mohammed bin Salman had been at the vanguard of reforms aimed at diversifying the economy, and making it more and more open for competition in a globalised world. But the country will maintain its oil production capacity at 12.5 million barrels a day until 2020.
It is a decisive moment for Saudi Arabia as the largest economy of the Arab world gears up for a new orientation, wherein the state will have a lesser say. The quest for privatisation is meant to buoy the local talent and industries, and to attract foreign investment. Which is why creation of some 450,000 private sector jobs by 2020 is part of the NTP, and will be carried out in the fields of mining, tourism and infrastructure. This will bring down unemployment to 9 per cent from 11.6 per cent. Moreover, the government plans to cut subsidies on water and electricity, which will add as much as 200 billion riyals to its coffers in the next four years. The NTP is part of a broader plan, known as Vision 2030, through which the kingdom wants to rejuvenate the economy. The plan includes a strategy to sell less than five per cent of state-owned oil giant, Saudi Arabia Oil Co, and to transfer ownership of the company, known as Saudi Aramco, to the kingdom's sovereign-wealth fund. Opting for smart governance and opening up many new avenues for public interaction are some of its other salient features. Riyadh faces a huge budget deficit owing to a steep fall in oil prices over the last many months. While Riyadh endeavours to boost its credit rating to Aa2 by 2020, it will have to walk a tightrope.

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