Riyadh – Mubasher: The International Monetary Fund (IMF) has warned Saudi Arabia against increasing spending as it would expose the kingdom’s public budget if oil prices dropped unexpectedly.
Public spending shall remain at “a sustainable level in different oil price environments”, the IMF said in a recent report.
The Washington-based fund stressed that the world's top crude exporter need to avoid a fiscal policy that would create undue volatility.
In June, Saudi Arabia decided to boost oil production again after oil prices rose sharply following the output cuts occurred in late 2016 by major producers.
Saudi revenues hiked 67% in the second quarter of 2018 as oil income jumped, while public spending increased by 34%, according to government figures.
The IMF recommended that the workforce could be narrowed gradually through “natural attrition" as nearly half of public spending goes on the wage bill.
Saudi authorities said in a response to the IMF that the civil service system is being revised with the help of the World Bank.
The country's key challenge is to create around 500,000 jobs for its citizens over the next five years, the IMF said while stressing the need for more posts within the private sector.
The IMF urged the Saudi government to create around 500,000 jobs for its citizens over the coming five years.
Around 1.4 million new jobs could be needed if female participation in the Saudi labour market rises by 1% a year until 2023, the report said.
The kingdom’s budget deficit is likely to maintain shrinking to 4.6% of gross domestic product (GDP) in 2018 and to as low as 1.7% in 2019 from 9.3% of GDP last year, the IMF indicated.
In July, the IMF raised Saudi Arabia's economic growth forecast to 1.9% for this year and the next.
In 2017, the Saudi economy eased by 0.9% for the first time since 2009 due to the plunge in oil prices.
It is worth noting that Saudi Arabia had posted a budget deficit of $260 billion for the past four consecutive years.
