Riyadh - Mubasher: The International Monetary Fund (IMF) estimates that Saudi Arabia can generate gross fiscal savings of around SAR 254 billion by 2020, on the back of the recent economic reforms.
“The net fiscal saving, taking account of the household and industry compensation, is estimated at SAR 210 billion by 2020, but not all revenues are expected to accrue to the budget given the taxation regime applicable to Aramco,” the report indicated.
The IMF said that the increase in prices across most major energy and water products in early 2016 was a first step towards bringing domestic prices closer to international prices.
“Recognizing that low energy and water prices were resulting in high and wasteful consumption and tended to disproportionately benefit the better-off, the government raised prices significantly, with increases ranging from 10% to 134%.”
“The strategy adopted appears to have been broadly successful, with the growth of energy consumption declining from 4.6% in 2015 to 0.2% in 2016, although slower economic growth played a role as well,” the report noted.
The IMF also said that a second wave of price increases is expected in 2017, with a rise in gasoline, diesel and electricity prices for households and non-households is expected be substantial.
“To reach international cost recovery prices, this would imply a 70% to 80% increase in the price of gasoline and electricity for households, while bringing diesel prices to 75% of the international benchmark (as envisaged) would imply a 195 percent increase. The authorities are also considering an automatic pricing formula once domestic prices are at international levels, beyond 2020.”
According to the report, the Saudi government is planning to compensate Saudi households for the energy and water price increases, and it is also planning to introduce a multi-year support program to help selected industries adjust to higher energy and water prices.
