Saudi Arabia applies spending cap despite oil revenues, says Minister

The Saudi Ministry of Finance has started to apply the spending cap regardless of the oil price and revenues, Minister Mohammed Al-Jadaan said at the Financial Stability Conference on Thursday.

The purpose of having reserves and investments with the Public Investment Fund was to give fiscal stability to government spending, Al Jadaan said.

Saudi Arabia has faced no challenges in issuing debt even at the worst time of the COVID-19 pandemic, he said.

The health sector will not be fully privatized as a service provider, but parts of it, such as radiology, could be, Al Jadaan said. He highlighted the high cost of equipment being behind this decision.

Privatisation will also continue in the education and logistics sectors and will intensify further in the next phase, he said.

The credit rating was important not only for government and government debt, but also for cost reduction, the Saudi Minister said.

There is a negative impact on the sovereign credit rating affecting the private sector, so the government is keen to ensure that these effects are avoided, Al Jadaan added.

Saudi Arabia's direction is clear about being a global logistics hub including rail and port networks, the minister said.

Ports are growing significantly, previously wasted opportunities have been activated and a large number of ports have been allocated to different types of services, according to Al Jadaan.

“There are very big opportunities for the private sector,” he said.

Faisal Al Ibrahim, the minister of economy and planning, said at the conference that the sources of growth depend on economic diversification.

Al Ibrahim argued that this requires empowering, linking and attracting private sector investment to sectors that have been able to export products and services that are highly competitive and do not depend on the value added by oil.

With regard to the Saudi economy, he said that the Kingdom had entered a period of economic recovery compared to last year.